Ministerial Correspondence, House of Commons European Scrutiny Committee

This document contains all the correspondence between Ministers and the European Scrutiny Committee. The correspondence is saved under the Government department that it relates to. Within each department, the correspondence is saved in reverse date order, so that the most recent letter is at the top. To go to the section relating to a particular department, press and hold the Control button and click on the relevant heading from the list below.

Government departments, ministries and offices

Department for Business, Energy and Industrial Strategy

Cabinet Office

Department for Education

Department for Culture, Media and Sport

Department for Communities and Local Government

Ministry of Defence

Department of Energy and Climate Change

Department for Environment, Food and Rural Affairs

Department for Exiting the EU

Food Standards Agency

Foreign and Commonwealth Office

Government Equalities Office

Department of Health

Home Office

Inland Revenue

Department for International Development

Department for International Trade

Ministry of Justice

Office of National Statistics

HM Revenue and Customs

Department for Transport

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HM Treasury

Department for Work and Pensions

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Department for Business, Energy and Industrial Strategy

Letter from the Chair to Margot James

Regulation of the European Parliament and of the Council on cross-border parcel delivery services 37821: 9706/16

Thank you for your letter of 28 November on the proposed parcel delivery services Regulation.2 We are grateful for the detailed overview it provided of both the European Parliament’s position as well as progress to date in trilogue negotiations.

Before we prepare our response, we ask you to provide a response to the second question in our most recent report.3 That is, whether, based on the proposed text of the Regulation the Presidency has agreed, which broadly appears to meet the aims the Government had set out in its original non-paper, the UK is likely to want to apply the terms of the legislation after the UK leaves the EU. We understand that you were unable to respond to this question as you had not yet received our report.

As scrutiny of this file nears completion, we also ask you to provide us with an analysis which clearly sets out:

those elements of the Regulation which could be retained in UK law and achieve part/all of their stated policy objective, in the absence of a bilateral UK-EU agreement;

those elements of the Regulation which could not be achieved in the absence of a bilateral agreement;

given that the Government has now clarified its intention to leave the Single Market, the implications for UK stakeholders (including both businesses and consumers) of (i) non-participation in the proposal, and (ii) of only retaining those effects of the proposal that can be achieved through domestic legislation; and

whether the Government believes it is feasible to include provisions on cross-border parcel delivery in a UK-EU free trade agreement or other form of bilateral agreement, and whether it anticipates that it will seek to do so.

We look forward to receiving your response by the end of January 2018, or sooner if progress in trilogue negotiations requires it.

19 December 2017

Letter from Margot James to the Chair

Regulation of the European Parliament and of the Council on cross-border parcel delivery services: Update to the Committee: 37821, 9706/16

I am writing to update you on progress on this file since the summer, including the European Parliament’s proposed amendments and our intended negotiating approach as the file moves into the trilogue process.

In broad terms, the Parliament’s proposed amendments support UK objectives, particularly in terms of reducing burdens on national regulatory authorities and postal operators in Article 3 (Information 3

Requirements) and Article 5 (affordability assessment). The Parliament introduced a new Article 6(a) that in part replicates existing EU obligations and in part imposes further obligations on online cross-border retailers. It requires retailers that deliver products to consumers based in another Member State, in particular to individuals and SMEs, to provide upfront delivery information and details of complaint handling processes of the retailer and the parcel delivery operator.

Member States discussed the European Parliament’s proposals at a Working Party on 8 November. The Presidency called for Member States’ constructive engagement to ensure that the negotiations reach a conclusion by the end of the year. In discussion, we and other Member States questioned how the Parliament’s proposed Article 6(a) added value. While we understand the rationale for increasing consumer protection (albeit only for cross-border retailers under this scenario), we do not believe that this Regulation is the place to address it. This Regulation is intended to increase price transparency and improve affordability of cross-border parcel delivery operator services, and not to increase or replicate existing consumer protection. We still have concerns that Article 3 extends the information requirement provisions to delivery operators’ sub-contractors. We would prefer to see a simplified approach adopted here, and similarly in the affordability assessment in Article 5, to facilitate the application in practice by delivery service providers and national regulatory authorities. We believe that both the Parliament and Member States will be encouraged to look for concessions as we move into the trilogue process and that there is scope for compromises to be reached.

28 November 2017

Letter from Margot James to the Chair

European Pillar of Social Rights (38691: 38693) 8637/17 and 8693/17

Thank you for sharing a draft of the Committee's report on the European Pillar of Social Rights. In the report there is a request for further details on the UK's future economic relationship with the EU post-Brexit and whether the UK could be obliged to continue implementing EU employment and social legislation as it develops.

The nature of the future economic relationship between the UK and EU is subject to negotiations, and as such we cannot provide certainty at this stage on whether the UK will be obliged to continue implementing EU Social and Employment legislation. Moreover, Parliament has voted not to disclose material that could damage the UK's position in its negotiations with the EU. It would therefore not be appropriate to discuss the details of our negotiating position here. While we remain members of the EU, Government have made a commitment to continue to act 'in good faith' on ongoing EU business. This means the UK continues to actively engage on current EU legislative proposals, assessing policies on their merits.

On the implementation period, the Prime Minister has said, people, businesses and public services should only have to plan for one set of changes in the relationship between the UK and the EU. So the framework for the strictly time-limited implementation period should therefore be the existing structure of EU rules and regulations. What it will look like precisely will be for the negotiations and will need to be in both of our interests. We are aiming to agree the detailed arrangements for this implementation period as early as possible to provide certainty for citizens and businesses.

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21 December 2017

Letter from Margot James to the Chair

Working Time Directive (38690) 8635/17

The European Scrutiny Committee recently considered my Department's Explanatory Memorandum about the European Commission's report on the implementation of the Working Time Directive (WTD)

The Committee cleared the report from Scrutiny but asked me to provide further information which I am pleased to do. The Committee asked for further information on three points:

A more substantive assessment of the Commission guidance

What changes to the organisation of working time in the UK will flow from the document?

What the status of the Commission's new guidance will be once the European Union (Withdrawal) Bill becomes law?

Assessment of t he guidance

As the Committee mentions in its report, there are many political sensitivities across Europe regarding the Directive, and attempts to review the Directive were unsuccessful.

However many Member States commented during the review process that the succession of CJEU rulings over many over the years had created some uncertainty about the exact content and extent of the Directive's provisions.

The Commission thus decided to publish legislative guidance which described CJEU rulings and their implications in some detail. The guidance was produced by DG Employment. The Commission has also added its own interpretation of some issues which have not yet been covered by CJEU cases, and this is clearly flagged in the document.

The guidance is not legally binding.

Our assessment of the document is that it is a useful summary reference document of the case law, and the Commission's views on areas that have not to date been tested in the CJEU.

Virtually all aspects of the Directive are covered in the guidance document. It discusses all the CJEU cases that have been of interest to the UK. These include those cases about on-call working ( SiMAP and Jaeger cases), carry-over of annual leave ( Stringer and Pereda), holiday pay ( Williams and Lock) and travel to and from a client's premises (Tyco).

These cases have been the subject of much discussion in the UK but the legal position is now generally clear. The discussion of the cases within the document does not add anything new to this legal position.

The Commission's own interpretation of working time issues not directly covered by court cases is uncontroversial. There is some discussion of the opt-out from the 48 hour maximum working week, retention of which has been a key priority for the CBI and other business organisations. The text of the guidance sets out the circumstances in which such an opt-out is allowed. This includes the arrangements which are currently used in the UK.

Implications for UK legislation

We will not need to make any changes to the UK Working Time Regulations (WTR} as a result of the new guidance.

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Status of guidance after the once the European Union (Withdrawal) Bill becomes law

The European Union (Withdrawal) Bill will provide that the WTR which transpose the WTD, and are made under s2(2) of the European Communities Act will be retained in national law

The Government has published draft Statutory Instruments to illustrate how the WTR will remain effective after the UK has left the EU

The Commission guidance is not legally binding but will continue to be a useful reference document.

21 December 2017

Letter from the Chair to Margot James

Implementation of the Working Time Directive (38690) 8635/17

I am writing on behalf of the European Scrutiny Committee to thank you for your letter of 21 December, replying to our questions about the latest European Commission report on the implementation of the Working Time Directive.1

We have drawn your reply to the attention of the Business, Energy and Industrial Strategy and Work and Pensions Committees. As we had already cleared the document from scrutiny, no further reply from you is necessary.

17 January 2018

Letter from Andrew Griffiths to the Chair

Coordination of insolvency proceedings in the EU: (38963), 11667/17

Thank you for your response to Richard Harrington MP’s Explanatory Memorandum dated 30 August 2017, regarding amendments to the Annexes to the EU Insolvency Regulation 2015/848.

My predecessor Margot James wrote to you on 11 December to advise you the Government had concluded it was in the UK’s interests to opt in to the amendments given the UK’s existing participation in the underlying Regulation. The Presidency of the Council was notified of this decision on 14 November. I note that the Committee has now cleared the document from scrutiny. Your Committee, however, raised a number of queries in its response, which I address below.

I have replied by separate letter to the queries raised by the Committee in respect of the draft Directive on preventive restructuring, second chance and insolvency measures.

In the absence of any deal on jurisdiction, recognition and enforcement in cross-border insolvency proceedings, the European Union (Withdrawal) Bill as currently before Parliament will enable the Government to amend EU law as it applies in the UK, to deal with deficiencies in that law arising from withdrawal and so ensure that insolvencies can continue to be managed as efficiently and predictably as possible. Potential deficiencies in the law might include the loss of reciprocal arrangements such as mutual recognition of insolvency proceedings and enforcement action. One option for the Government would be to amend the law so that insolvency proceedings commenced in the EU are no longer automatically recognised in the UK. In that case EU insolvency office-holders who wish to be recognised

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in the UK, allowing them, among other things, to deal with the debtor’s assets located here will have a number of options. I have set out these options below.

Foreign insolvency office-holders may apply to court for recognition under the provisions of the Cross-Border Insolvency Regulations 2006 and the Cross-Border Insolvency Regulations (Northern Ireland) 2007 (the regulations which give effect to the UK’s adoption of the UNCITRAL Model Law on Cross-Border Insolvency). These regulations embody the concept of ‘foreign main’ and ‘foreign non-main’ proceedings which are similar to the ‘main’ and ‘secondary’ proceedings concepts that underpin the jurisdiction provisions contained in the EU Insolvency Regulation.

Whilst these regulations provide pragmatic frameworks that allow for the reasonably efficient handling of a cross-border insolvency involving a UK element, there is no automatic recognition and the frameworks do not include many of the features of the EU Insolvency Regulation, such as provisions requiring court-to-court cooperation or coordination of multiple proceedings involving members of the same corporate group.

Alternatively, a foreign office-holder may apply to a UK court for relief on other grounds under the common law. Generally speaking these provisions adhere to the underlying principle of ‘universalism’, in that there should be one insolvency proceeding in the court of the debtor’s domicile and that these proceedings should be recognised globally.

Statutory arrangements exist in respect of the Republic of Ireland (which pre-date the EU Insolvency Regulation) which allow the Irish Court to seek assistance from UK courts in matters relating to insolvency proceedings. UK courts have discretion to provide broad assistance in such cases including applying foreign insolvency law.

Where a UK insolvency office-holder wishes to be recognised in an EU member state so that they can deal with assets for example, this will depend on the national law of the relevant member state. Several member states (Poland, Greece, Romania and Slovenia) have also adopted the UNCITRAL Model Law and therefore substantively similar rules will apply for a UK office-holder seeking recognition and relief in those states. In other member states the position varies. We have conducted an analysis of certain member states’ national provisions on jurisdiction, recognition and enforcement and have concluded that some have laws that would facilitate the relatively smooth operation of cross-border insolvencies involving a UK ‘main’ proceeding whilst others do not.

The Government is therefore committed to seeking, as part of the exit negotiations, an agreement with the EU that allows for close and comprehensive cross-border civil judicial cooperation on a reciprocal basis which reflects closely the substantive principles of cooperation under the current EU framework. This will benefit businesses in both the UK and the EU, providing certainty and efficiency in the handling of cross-border insolvency cases.

You asked that the Government comment on the possible impact of an implementation period on cross-border cooperation. The UK Government is working hard to ensure the smoothest possible transition between our current and future arrangements by calling for a strictly time-limited implementation period, so that people, businesses and public services only have to plan for one set of changes in the relationship between the UK and EU We will therefore seek for the framework of this implementation period to broadly follow the existing structures of EU rules and regulations.

12 January 20187

Letter from the Chair to Andrew Griffiths

Coordination of insolvency proceedings in the EU: (38963), 11667/17

Thank you for your letter of 12 January in response to our Report of 19 December. As you note, in that Report the Committee cleared from scrutiny the proposed Regulation on amending the Annexes to the EU Insolvency Regulation 2015(848).

I would like to thank you in particular for your helpful and frank exposition of the issues that might be encountered in the event of a “no deal” on jurisdiction, recognition and enforcement of insolvency proceedings.

I would also like to ask whether the Committee could have sight of the Government’s analysis of Member States’ national laws which could affect the recognition of UK “main” insolvency proceedings and office-holders.

24 January 2018

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Cabinet Office

No correspondence sent or received.

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Department for Education

No correspondence sent or received.

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Department for Culture, Media and Sport

Letter from the Chair to Tracey Crouch

Proposed Regulation on the European Solidarity Corps — (38789), 9845/17

Thank you for your Explanatory Memorandum (EM) of 30 June.

Whilst the Committee has considered the proposed Regulation and your Explanatory Memorandum today and has decided to clear the document from scrutiny without a Report to the House, this was on the basis that you respond to this request for clarification.

Your EM is very comprehensive and even examines the question of whether the UK might consider participating in the European Solidarity Corps after Brexit. But we would like more clarity on the Government’s approach should the Regulation come into force before the UK’s exit from the EU. Could you please confirm that the UK accepts that in that situation the Regulation would apply to the UK and so require it to comply with the Regulation (which includes the UK’s participation in the European Union Solidarity Corps)?

13 November 2017

Letter from John Glen to the Chair

Council Decision approving a mandate for the Commission to open negotiations on the United nations World Tourism Organisation’s Convention on the Rights of Tourists and the Obligations of Tourism Service Providers (38789) 9845/17

I am writing to inform you about the Council Decision to award a negotiating mandate enabling the Commission to negotiate the United Nations World Tourism Organisation’s Convention on the Rights of Tourists and the Obligations of Tourism Service Providers on behalf of Member States. Following work to ensure that Member State competences are respected, the Government supports the proposed mandate.

On 23 June 2016, the EU referendum took place and the people of the United Kingdom voted to leave the European Union. The government respected the result and triggered Article 50 of the Treaty on European Union on 29 March 2017 to begin the process of exit. Until exit negotiations are concluded, the UK remains a full member of the European Union and all the rights and obligations of EU membership remain in force. During this period the Government will continue to negotiate, implement and apply EU legislation.

The Convention covers protection for tourists in the event of an emergency, and tourists’ relationship with package travel and accommodation providers:

Annex I covers civil contingencies, a Member State competence.

Annex II focuses of the obligations of package travel providers and is based on Directive (EU) 2015/2302 (the EU Package Travel Directive).

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Annex III covers the obligations of accommodation service providers regarding provision of contractual information and performance of contracts. This is based on the Directive (EU) 2011/83/EC (Consumer Rights Directive EU).

The Convention allows for signatories to accede to one or all of the annexes in the Convention. Due to the mixed content of the Convention, Member States have only awarded the Commission a mandate for negotiating areas where there is Union competence. Member States will retain their competence in the areas covered by the Convention which do not affect common rules or alter the scope of such rules. Therefore the Commission only has a mandate to negotiate in close cooperation with Member States:-

(a) The preamble and Articles 1 to 21;

(b) Annex II;

(c) Annex III, with the exception of Article 5.

The mandate also obliges the Commission to seek to ensure that the Convention is compatible with EU law, in particular Directive (EU) 2015/2302 (the EU Package Travel Directive) and Directive (EU) 2011/83/EC (Consumer Rights Directive), to avoid or minimise any future legislative changes.

This represents the first of a two-stage process, as the Commission will return to seek Council approval for the text of the Convention once finalised. Member States will be regularly consulted throughout the process, and I will continue to update the Committee as these negotiations progress.

10 July 2017

Letter from the Chair to John Glen

UNWTO Convention on the Rights of Tourists (38789) 9845/17

I write to thank you for your letter of 10 July 2017 with respect to the UNWTO Convention on the Rights of Tourists, which is currently under negotiation.

I would be grateful if you would keep the Committee informed of progress in these negotiations, in particular if developments in the talks mean the Convention could necessitate changes to the EU Consumer Rights or Package Travel Directives, which in turn may require new legislative measures in the UK. I would also welcome your estimate of when the negotiations might be concluded, given that the UNWTO’s original timetable — under which the final Convention would be submitted to its General Assembly in September 2017 — was clearly not realistic.

We trust that the exercise of respective EU and Member Sate competence will be transparent. 

The Committee would also welcome confirmation from you that Directives 2011/83/EU and 2015/2302/EU, on which the Convention appears to be largely based, are expected to remain on the UK Statute Book substantially unchanged in the immediate post-Brexit period, either as part of the implementation period sought by the Prime Minister, or as part of the process of retaining EU law under the European Union (Withdrawal) Bill.  

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13 November 2017

Letter from Rt Hon Matt Hancock to the Chair

Future Partnership Paper: The EU-UK data protection relationship  

I am writing to you and your committee to inform you that the Government has published a ‘Future Partnership’ paper outlining the future EU-UK data protection relationship, which I have attached with this letter. This paper is the result of the Government’s commitment to publishing a series of papers over the summer, setting out in more detail its proposals for the UK’s future relationship with the EU.

The Government’s paper sets out how the UK is one of the leading drivers of data protection standards across the globe. After our exit, the UK will remain a global leader on data by promoting both its unhindered flow internationally and appropriate high levels of data protection rules. Data flows are essential for the economic prosperity of both the EU and the UK, and it is estimated that 75 per cent of our cross-border data flows are with EU countries.

This means that as the UK and the EU build a new, deep, and special partnership, it is essential that we agree a model for protecting and exchanging personal data. The model should maintain the unhindered flow of personal data between the UK and the EU as well as offer sufficient stability and confidence for businesses, public authorities, and individuals.

The paper explores options, including a UK-EU model that could build on the existing adequacy model. This model could enable an ongoing role for the Information Commissioner’s Office in the European Data Protection Board in a way to be agreed which would reassure businesses and consumers.

The Government’s paper also reiterates the importance of providing clarity and certainty for businesses and individuals as soon as possible that data flows will not be disrupted when the UK leaves the EU.

24 August 2017

Letter from the Chair to the Rt Hon Matt Hancock

Future Partnership Paper: The EU-UK data protection relationship

Thank you for your letter of 24 August 2017 enclosing the Future Partnership Paper on the EU-UK data protection relationship after UK exit from the EU.  

The issues addressed in that paper are relevant to an EU document scrutinised by the previous Committee: the Commission Communication on “Exchanging and Protecting Data in a Globalised World”: (38493), 5191/17. The document remains under scrutiny, in anticipation from further updates from you on how the UK would share data as a third country with the EU after Brexit. As part of our continued scrutiny of that document we would be grateful if you could clarify in due course:  

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What legal mechanisms the Government has in mind for enabling data exchange with the EU after Brexit for both commercial and law enforcement purposes – it is not clear whether this will be Commission adequacy decisions provided for by the new General Data Protection Regulation and the Law Enforcement Directive or international data-sharing agreements;  

What each of those mechanisms has to recommend it from a legal and operational point of view;

How the UK will continue to exchange data with the EU and with third countries who have an adequacy decision with the EU during any transitional/implementation period, as suggested by the Prime Minister in Florence;  

Whether a transitional/implementation period is necessary to allow time for a UK adequacy decision to be put in place; and  

Whether any data adequacy decision will be legally sustainable if the current UK policy, as legislated for in the Investigatory Powers Act 2016, is to permit retention of metadata on a bulk scale for possible future surveillance purposes.

On a related point, we have already requested an update from your officials on the proposed E-Privacy Regulation negotiations, in particular as to whether the issue of data retention and bulk retention of e-communications metadata is proving a stumbling block.  

13 November 2017

Letter from Matt Hancock to the Chair

Update on: (38106)12252/16 - proposals for a revised European Electronic Communications Code (EECC) (recast); trilogue mandate sought at COREPER meeting (11 October) and (38107) 12257/16 - proposal to establish a new Body of European Regulators for Electronic Communications (BEREC) Regulation

In October 2016, I submitted the explanatory memoranda (EMs) referenced above, which were retained under scrutiny, and committed to keeping your Committee updated as negotiations progressed. Since then, I have provided updates to your Committee in February, April, and in August. Most recently, I wrote to you on 5 September to notify you of the Presidency’s plans for COREPER on 11 October.

When I wrote to you on 5 September, I explained that the Presidency’s aim was to agree a general approach and attempt to secure a mandate for EECC trilogue negotiations.

I can now confirm that COREPER will be used as an opportunity to agree a mandate for trilogue negotiations, but it will not be used to agree a general approach.

I am therefore writing to update you on the progress of EECC negotiations prior to COREPER. Later in the year, negotiations will go to a Council meeting (not necessarily Telecoms Council, which is on 4 December) so that a general approach can be agreed. I will write to you prior to the Council in question to request a waiver or clearance.

The COREPER mandate will enable the Estonian Presidency to hold two to three trilogues on the EECC before the end of the year.

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There has been no discussion of the BEREC Regulation in Council thus far, but the Presidency intends to issue a revised text late September and to discuss it at Council Working Groups on 10, 11 and 26 October. The Presidency hopes to be able to reach a general approach on the BEREC regulation in December at Telecoms Council. As was evident at both Telecoms Councils this summer, a majority of Member States are opposed to making BEREC into an EU agency.

It is of course possible that this provisional schedule for both files will slip.

Policy proposal updates:

Council Working Groups on the EECC resumed in September, so there have been further discussions on the EECC since I last wrote.

Spectrum: Council Working Groups (CWGs) addressing Spectrum resumed on 5 September. The Presidency acknowledged the concerns of the UK, along with many other Member States, that the Commission’s proposals unnecessarily extend Commission powers of intervention in spectrum management procedures. Subsequent iterations of the Council’s compromise text have removed or re-drafted these powers to reflect a position that we are broadly content with. We are continuing to work with other Member States to agree collaborative solutions to any outstanding issues within the text.

Services: Since Council Working Group discussions resumed there has been some discussion of the Services elements of the EECC. The Presidency supports full harmonisation of consumer rights as set out in the EECC. We do not support this position because full harmonisation would prevent Member States from applying higher standards of consumer protection. The Presidency text improves on the Commission’s text in such a way that should enable the UK to maintain its consumer protection levels, although we are still negotiating the wording to ensure that our concerns are met in full.

On Over-The-Top services (OTTs), our position remains the same as set out in my August update. We continue to argue for a proportionate approach to regulation which should only exist in the case of consumer harm, proven market failure or in cases where these services exhibit characteristics similar to those of traditional telecommunication services.

Regarding the Universal Service Obligation (USO), we continue to support the draft of the text, which in March reintroduced full funding flexibility for the USO, which allows the USO to be funded, as currently, by an industry cost sharing mechanism, public funding, or a combination of two. There have been no substantive debates on USO since then.

Access and Investment: We continue to support the Commission’s vision of affordable, reliable and ubiquitous first class electronic communications networks across the EU in order to meet consumers’ growing demands on connectivity and to boost competitiveness. Its key objective is to encourage the private sector investment in infrastructure required to meet this vision. It also contains a commitment to retain the core principle of competition as a driver of this investment as well as consumer choice.

A small number of points of detail remain that need to be resolved. DCMS officials are working with like-minded Member States to argue against proposals by the Commission that will not support competitive markets and risk re-creating localised monopolies for national incumbent operators.

3 October 2017

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Department for Communities and Local GovernmentNo correspondence sent or received.

Ministry of DefenceLetter from the Chair to Earl Howe

European Defence Agency 2018 Budget (39260)

Thank you for your Explanatory Memorandum of 4 December on the budget for the European Defence Agency for 2018.1 The Committee has today cleared the document from scrutiny, although we note that the budget had already been agreed by the Agency’s Steering Board on 13 November.

As you will be aware, the Committee has always insisted on timely submission of documents for scrutiny. It is established practice that the fact a document is classified as “LIMITE” does not prevent or delay its submission to the Committee. Indeed, the related report on the EDA’s activities in 2017 was provided for scrutiny despite its LIMITE classification.2 We will therefore expect the Agency’s draft budget for 2019 to be submitted before its adoption by the Steering Board, and we would be grateful if you could confirm this will be the case.

Similarly, the Committee would like to draw your attention to the delays it has experienced in receiving information from your Department in relation to other recent EU documents including the European Defence Action Plan3 and the proposal for a Regulation establishing the EDIDP.4

We understand that there are, of course, occasions where it is not possible to formally submit documents to Parliament in advance of their being agreed. However, we would expect to be informed in a timely way of the likely substance of such documents, and the Government’s provisional position, when such a situation is foreseen. The correspondence from the Government on Permanent Structured Cooperation was a good example of how scrutiny should be handled if timely submission of formal documents is unfeasible for reasons beyond the Government’s control.

Similarly, the Committee values being provided with information throughout the Council’s deliberations, and not only when formal consideration at ambassadorial or ministerial level has already been scheduled. In that way, the Committee will at least be aware of the direction of travel within the Council if agreement is reached unexpectedly rapidly, and there is too little time to consider a scrutiny waiver or clearance.

This would have been helpful, for example, in the event of the recent scrutiny override on the EDIDP Regulation. The Committee will take scrutiny overrides much more seriously where it has been left in the dark about the status of the negotiations until an agreement is already reached.

I understand that my colleagues on the House of Lords EU Sub-Committee on External Affairs are considering writing to you with similar concerns.

I have today also written to you separately as regards the EDA’s annual report for 2017, with respect to the Agency’s new principles for engagement with non-EU countries.

10 January 2017

Letter from the Chair to Earl Howe

EDA principles for engagement with third country

Thank you for your Explanatory Memorandum of 4 December on the annual report of the European Defence Agency (EDA) to the Council.1 The Committee has today cleared the document from scrutiny.

However, we would be grateful if you could provide us with more information on the “key principles” for EDA engagement with third countries, to which you refer in your Memorandum. It is likely that the UK will seek an Administrative Arrangement with the EDA after Brexit. Further information on its approach to third countries will enable the Committee to take informed decisions during scrutiny of other relevant EU policy documents, including the EDIDP Regulation2 and PESCO.3

The Committee would be grateful to receive your reply by 31 January.

10 January 2017

Department of Energy and Climate Change

No correspondence sent or received.

Department for Environment, Food and Rural Affairs

Letter from George Eustice to the Chair

Proposal for a Council Decision on the position to be taken on behalf of the Union within the sanitary and Phytosanitary Sub-Committee established by the Association Agreement between the European Union and the European Atomic Energy Community and their Member States, of the one part, and Ukraine, of the other (38785) 9741/17

I am writing to express my regret at the late submission of this Explanatory Memorandum. Unfortunately a handling error resulted in the late submission of this Explanatory Memorandum; this has been addressed across several Departments in Whitehall to ensure it does not reoccur. 

This delay has in turn not allowed time to secure clearance from the Parliamentary Scrutiny Committees in time for the Committee of Permanent Representatives in the European Union (COREPER II Ambassadors) which took place on 12 July 2017 where the proposal was tabled as an “I” Point. The proposal was cleared through COREPER II and will be tabled as an “A” Point for adoption at the EU Agriculture and Fisheries Council on Monday 17 July 2017. 

As the attached Explanatory Memorandum sets out, the proposal establishes the position to be taken by the European Union within the Sanitary and Phytosanitary Sub-Committee established under the Association Agreement between the European Union and Ukraine.

18 July 2017

Letter from the Chair to George Eustice MP

Sanitary and phytosanitary aspects of the EU-Ukraine Association Agreement (38785) 9741/17

Proposals for Council Decisions on the conclusion and signing of an agreement in the form of an exchange of letters between the EU and Norway concerning additional trade preferences in agricultural products (39139) 13354/17 + ADDs 1–5, (39140) 13389/17 + ADDs 1–5

Thank you for your Explanatory Memorandum (EM) of 18 July, letter of 18 July and corrigendum of 11 August on the EU-Ukraine proposal and for your EM of 24 October and corrigendum of 2 November on the EU-Norway proposals. Both corrigenda were prompted by Committee officials.

We considered the documents at our meeting of 22 November 2017 and cleared them from scrutiny.

As you will be aware, there were a number of omissions from the original EMs, which is why the corrigenda were necessary.

You originally stated that the EU-Ukraine proposal was not a proposal for legislation, that it had no legal basis, no European Parliament procedure and that the voting procedure was “not applicable”.

The corrigendum corrected the omissions made in the original EU-Ukraine EM as regards legal base, European Parliament procedure and voting procedure. The corrigendum maintained that the proposal was not a “proposal for legislation”, noting also that the proposal was not “for a legislative act”.

It is technically correct to note that the proposal was not a proposal for a “legislative act” as defined by Article 289 TFEU. Nevertheless, Article 288 TFEU is clear that a Council Decision — like a Council Regulation — is a legal act of the EU and “binding in its entirety” (unless it specifies those to whom it is addressed), so sharing some characteristics of “legislation” as more informally understood.

Furthermore, this proposed Council Decision is based on a Treaty legal basis (Article 218(9) TFEU) which has been the subject matter of an important legal challenge by Germany.1 It has also been the normal practice of DEFRA and other Departments to provide all the information missing from the current EM in cases of proposals based on Article 218(9).2

Your original EM on the EU-Norway proposal failed to provide accurate legal bases and European Parliament procedures for each of the proposals. These omissions were corrected in the corrigendum.

These omissions have had no deleterious effect as they were identified by our own officials. Nevertheless, they have undermined our confidence in the quality and consistency of material provided by your Department. We remind you that an EM constitutes the Government’s formal position to Parliament and should be as full and helpful as possible.

Whilst it is relevant that Cabinet Office Guidance provides that “EMs on EU documents which do not contain legislative proposals may not have to include” the five sub-headings of “Legal Basis”, European Parliament Procedure, Voting Procedure, Impact on UK law and Fundamental Rights Analysis”, this is not an instruction to Departments to omit this information. Any Member of Parliament ought to be able to understand the core characteristics of, and issues surrounding, a proposal based on reading the EM alone.

We ask that you consider making changes to the clearance process applied to EMs and correspondence in order that we can be re-assured that material will provide all relevant information, particularly where such an important legal basis is concerned.

22 November 2017

Letter from George Eustice to the Chair

Cloning of animals and the marketing of food from animal clones - (35688) 18152/13 and (35689) 18153/13

My letter of 6 September 2016 provided you with a brief update on progress with these EU dossiers. I can now confirm that there has been no substantive discussion of them under the Maltese Presidency in the first half of this year and we are not expecting any further progress under the Estonian Presidency. I will of course continue to keep you informed of any significant developments.

20 July 2017

Letter from the Chair to George Eustice

Cloning of animals and the marketing of food from animal clones - (35688 and 35689) 18152/13 and 18153/13

Thank you for your letter of 20 July on the above proposal, noting that discussions are to reopen.

We look forward to an update, including on the Government's approach, when there has been sufficient progress to report.

In the meantime we retain the proposal under scrutiny.

29 November 2017

Letter from George Eustice to the Chair

EU-Norway - additional trade preferences in agricultural products

Override letter (39140) 13389/17, (39139)13354/17

EM 13389/17: Proposal for a Council Decision on the Signing on behalf of the European Union, of an Agreement in the form of an exchange of letters between the European Union and the Kingdom of Norway concerning additional trade preferences in Agricultural Products (and ADD 1-5).

EM 13354/17: Proposal for a Council Decision on the Conclusion of the Agreement in the form of an exchange of letters between the European Union and the kingdom of Norway concerning additional trade preferences in agricultural products (and ADD1-5)

I am writing to explain my decision to override Parliamentary scrutiny of the Commission’s proposals concerning the conclusion of agreement for additional trade preferences in agricultural products, and the signing of that agreement.

The Commission brought forward its proposals for the conclusion and signing of the agreement on 17 October. Defra submitted an explanatory memorandum (EM 13389/17, 13354/17) to Parliament on 31 October. I understand that this was considered by the House of Lord’s Scrutiny Committee on 7 November but was not seen by your Committee until 23 November, after the relevant sitting of COREPER which was on 15 November and the following Council meeting on 20 November. I understand that the proposal was cleared by your committee successfully (agenda for report no 2 ;22/11/2017), nevertheless I feel it is important to provide you with my reasoning for my decision to override.

The agreement will be beneficial to UK farmers and producers, so it was in our interests to ensure it was adopted smoothly. In addition this is a sensitive time, and the UK is currently seeking to engage with Norway regarding the transition of this EU agreement amongst others. As a result the potential appearance that the UK was impeding the adoption of this agreement by the EU could have risked reputational damage with Norway and inhibited our work towards a smooth EU exit process.

Overriding the scrutiny of proposals from the European Commission is not an action that I take lightly. However, in this instance, I believe it was in the best interests of the UK to support the proposal.

6 December 2017

Letter from the Chair to George Eustice

Proposals for Council Decisions on the signing and conclusion of an agreement between the EU-Norway on additional trade preferences in agricultural products — (39139-40) 13354/17, 13389/17

Thank you for your letter of 5 December on the above proposals, explaining your decision to override scrutiny.

The Committee noted, and understood, your decision to override scrutiny on this occasion. We require no further correspondence on the matter.

19 December 2017

Letter from George Eustice to the Chair

Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 1380/2013 on the Commons Fisheries Policy Explanatory Memorandum (38974) 11483/17

I am writing to explain my decision to override Parliamentary scrutiny of the European Commission’s proposal to amend the Common Fisheries Policy basic regulation, in order that discard plans can be extended for a further total period of three years. This proposal was agreed at the EU Foreign Affairs Council (Trade) on 10 November.

You wrote to me on 11 October with a number of questions on this proposal and I hope you found my response of 29 October informative.

This amendment is essential to maintain the consistent implementation of the landing obligation through the adoption of temporary discard plans, as multi-annual plans have not yet been fully developed and implemented to cover both pelagic and demersal fisheries in the North Sea and North Western Waters. This has become an urgent matter as the current pelagic discard plans are due to expire on 31 December 2017. I believe it was important for the UK to vote in favour of this amendment, rather than abstain, given the risk of a legislative gap and the potential adverse repercussions this would have had for the UK. Overriding the scrutiny of proposals from the Commission is not an action I take lightly, however I believe it was in the best interests of the UK to support the amendment.

15 November 2017

Letter from the Chair to George Eustice

Proposal for a Regulation amending Regulation (EU) No 1380/2013 on the Common Fisheries Policy — (38974) 11483/17

Thank you for your letter of 15 November on the above proposal, explaining your decision to override scrutiny.

The Committee noted, and understood, your decision to override scrutiny on this occasion. We require no further correspondence on the matter.

13 December 2017

Department for Exiting the EU

Letter from the Baroness Anelay St Johns to the Chair

Proposed Regulations adapting remaining acts in JHA and JHA fields using pre-Lisbon comitology to post-Lisbon delegated and implementing acts procedure: (38475:5623/17) and (38481: 5705/17)

Thank you for the report on the above Commission Proposal of 25th April. I am writing to provide additional information as requested in relation to the implications of the proposals on the UK’s exit from the EU. 

I agree with the Committee that the rules governing comitology processes will be important to the UK following our exit from the EU. However, at this stage the precise extent of this is unclear, as it will be heavily dependent on the specific details of any agreements struck between the UK and the EU, and how closely the UK will seek to align with the EU acquis on a sectoral basis following our exit.   

However, whatever form our future relationship with the EU may take, the Government believes that both UK and EU interests are better served by current comitology procedures. They provide a more robust and evidenced-based approach and provide more input from Member States into the process.  The UK has a long-standing tradition of demonstrating the value of evidence-based policy making through its own procedures, and continues to believe technical expertise from across the Member States is a vital aspect of the decision-making process.  As outlined in the Explanatory Memorandum, we have concerns regarding the potential politicisation of the process under the Commission’s proposals and believe it is crucial to ensure comitology remains expert-led and apolitical.   

We consider it important that the UK remains engaged on this proposal, and we will continue to shape recommendations, as we agree with other Member States that continuing to involve national technical expertise in policy making is crucial in achieving policy objectives.  

27 June 2017

Letter from the Baroness Anelay St Johns to the Chair

Proposal for a Regulation of the European Parliament and of the Council adapting a number of legal acts providing for the use of the regulatory procedure with scrutiny to Articles 290 and 291 of the Treaty on the Functioning of the European Union EM (38481) 5705/17 and (38475) 5623/17

I am writing further to the above Explanatory Memorandum relating to EU proposals to align pre-Lisbon Treaty comitology procedures to the post-Lisbon Delegated Acts and Implementing Acts.

I thank you for your response of 22 February 2017, retaining the document under scrutiny and requesting updates on significant developments in the negotiations. Each individual change is currently being discussed in the EU at a technical level, and I will in due course provide an update on the progress of these proposals, as requested. However, I am writing to inform you about the

Government’s decision to opt-in to three regulations affected by the proposals and to provide you with a copy of the Written Ministerial Statement that is being laid in Parliament.

On 9 June, the Government opted in to a proposal to change the updating mechanism of three civil judicial cooperation Regulations – the 2001 Regulation on taking evidence in other Member States, the 2004 Regulation that created that European Enforcement Order and the 2007 Regulation on service of documents - from the old comitology procedure to the post-Lisbon treaty Delegated and Implementing Act procedures.

The substance and effect of these Regulations are not being amended, but instead becoming subject to the same updating procedures as apply to other, post-Lisbon Regulations. As outlined in the WMS, these changes were merely a technical adjustment forming part of a wider effort to streamline legislation, which the UK is wholly in support of. By opting in, we have protected the UK’s position in relation to three crucial procedural instruments in the area of civil judicial cooperation, and demonstrated the UK’s commitment to its rights and obligations as an EU Member State until exit negotiations are concluded.

17 July 2017

Letter from the Chair to Lord Callanan

Proposed Regulations adapting remaining legal acts in JHA and non-JHA fields using pre-Lisbon comitology to post-Lisbon delegated and implementing acts procedure: (38475) 5623/17 and (38481) 5705/17

We refer to your predecessor’s letter of 17 July, enclosing a copy of the Written Ministerial Statement (WMS) notifying Parliament of the opt-in decision in respect of the three civil justice measures covered by the JHA proposal.

Whilst the Committee will not report on this matter further to Parliament until it has received further updates from you on the progress of both proposals, I write to express my disappointment about the Government failing to observe its scrutiny obligations to Parliament on the opt-in process. In particular, we would like to know for the purposes of our further reports:

Why the Government did not mention the prospective opt-in decisions in its Explanatory Memorandum or afford Parliament the usual eight week period to consider the opt-in question; and

Why the Government only notified its decision to the EU in June when the original proposal was published in January of this year – was there a delay in the presentation of the proposal to the Council?

The Committee understands that on this occasion, the opt-in decision related to a technical change to the three civil justice measures concerned. We also recognise that Parliament has been informed of the decision, albeit after the event, by means of the WMS. Nevertheless the Committee will be

concerned if there are further lapses in Government’s scrutiny obligations to the Committee on the opt-in process, especially if the circumstances are more significant both for the UK’s current EU membership and its future relationship with the EU.

13 November 2017

Letter from Lord Callanan to the Chair

Proposal for an Inter-Institutional Agreement on a Transparency Register (38141) 12882/16

Following your letter of 14 December 2016 to my predecessor David Jones MP I am writing to update you on progress of Commission proposals for an inter-institutional agreement (llA) on a transparency register for lobbyists. I understand that the Committee retains the proposal under scrutiny. I apologise for the length of time it has taken to update the Committee.

In accordance with the position set out in our EM of 25 October 2016, the UK broadly welcomes the Commission's proposals which increase the transparency of the EU Institutions. Additionally, it is the Government's view that the proposals do not create unnecessarily burdensome requirements for industry and other stakeholders and that the funding for the register should be made available from the existing budget.

Since the original proposal was published, the llA has been revised following working group discussions. The Council also published its own draft Decision on 30 June, the key difference from earlier proposals relating to the register's application to the Council. The proposal is now limited to meetings with the Secretary-General and Director Generals of the General Secretariat; participation in thematic briefings (meetings organised by the Council Secretariat to update third parties on progress of various initiatives); participation in public events organised by the General Secretariat with interest representatives as speakers; and, lastly, access to Council premises.

Previously, the proposals covered third party interactions with Member State Ambassadors and COREPER deputies.

The European Parliament adopted its negotiating mandate on the proposal on 15 June 2017. Its mandate is based on three broad principles:

The widest possible scope of application for the EU Institutions and other bodies, including meaningful participation by the Council,

A comprehensive and clear framework, without weakening the current system, for the regulation of interest representation activities";

"Structures and resources that guarantee an effective implementation." In summary, we are like-minded with the European Parliament's key objectives

In September, the Estonian Presidency commenced discussions on the llA at working group level. Member States have generally engaged positively with the proposal and the UK has been actively involved in technical discussions. On 20 November the Presidency updated the General Affairs Council of progress and on 6 December

COREPER approved the mandate for informal trilogue discussions. I enclose a copy of the mandate, which is marked limited and shared with the Committee in confidence. We expect the proposal to be voted on in a General Affairs Council in the New Year.

I recognise the Committee has previously expressed an interest in the register's potential date of coming into force, so I readily repeat my predecessor's commitment to keep you updated on this matter. At the moment, I can only confirm that it remains unclear. With regards to connections with our exit negotiations, the Government considers there to be no policy crossover and we will therefore work constructively with the EU27 to achieve a desirable outcome.

I am writing in similar terms to Lord Boswell, Chairman of the Lords European Union Committee, the Clerks of both Committees and Les Saunders, departmental scrutiny co-ordinator at the Department for Exiting the European Union.

21 December 2017

Letter from Lord Callanan to the Chair

Proposed Regulations adapting remaining legal acts in JHA and non-JHA fields usingpre-Lisbon comitology to post-Lisbon delegated and implementing acts procedure:(38475) 5623/17 and (38481) 5705/17

Thank you for your letter of 13 November on the above listed proposed regulations. Officials

from the Department have been in touch with the Committee about this response and I

apologise for not replying sooner.

Your letter asked why the Government did not mention the prospective opt-in decisions in

our Explanatory Memorandum (EM) or afford Parliament the usual eight week period to

consider the opt-in question. You are correct that the EM should have referred to the opt-in

and I apologise that it did not. ln this case, the proposal itself did not envisage the opt-in

because the institutions believed that it should automatically appl¡¡ to the UK given that we

have opted into the relevant Regulations, therefore at the time it was overlooked. However,

given the proposal cites a legal base in Part 3 of Title V of the Treaty on the Functioning of

the European Union, and amends existing JHA legislation, it was subsequently confirmed

within Government that Article 4a of Protocol (No. 21) should apply and that the UK needed

to take an opt-in decision on this measure.

Your letter also asked why the Government only notified its decision to the EU in June when

the original proposal was published in January of this year. As you know, our opt-in starts to

run from the date of the last language version and in this case, the last version was not

published until 13 March, meaning the latest opt-in date was 12 June. I am also sorry we did

not alert the Committee to that timetable when it became clear.

I understand the Committee's concerns regarding further lapses in Government's scrutiny

obligations to the Committee on the opt-in process, especially if the circumstances are more

significant both for the UK's current EU membership and its future relationship with the EU.

Until exit negotiations are concluded, the UK remains a full member of the European Union

and all the rights and obligations of EU membership remain in force. During this period the

Government will continue to negotíate, implement and apply EU legislation, including

undertaking detailed scrutiny of EU legislative proposals. ln light of this, DExEU officials

recently reminded departmental scrutiny coordinators of the Government's undertakings as

set out in the JHA opt-in code of practice which underpins the Government commitments

given in previous statements to the House.

20 December 2017

Letter from the Chair to Lord Callanan

Proposed Regulation adapting remaining legal acts in JHA1 fields using pre-Lisbon comitology to post-Lisbon delegated and implementing acts procedure: (38481), 5705/17

Thank you for your letter of 20 December. The Committee welcomes your apologies for the lapses in the Government’s scrutiny obligations in relation to the opt-in decision on this proposal. We do, of course, expect no repetition of these shortcomings. We note that your department’s officials have been taking some action to pre-empt that with departmental scrutiny coordinators.

The Committee also looks forward to a substantive update on any progress in the negotiations of this and the other alignment proposal dealing with non-JHA measures requiring adaptation to post Lisbon subordinate legislation procedures (38475, 5623/17).

17 January 2018

Letter from the Chair to Lord Callanan

Proposal for an Interinstitutional Agreement on a Mandatory Transparency Register: (38141), 12882/16

The Committee would like me to thank you for your letter of 21 December 2017.

We note your apology for the year-long delay in providing an update to the Committee on the proposal. However, we find other aspects of the Government's scrutiny handling of this document to be unsatisfactory.

Firstly, it would have been better to have written to the Committee in advance of the agreement of the mandate in COREPER so that any views of the Committee could have been taken into account. In any case, it is unclear why a letter dated 21 December encloses a “limité” version of the COREPER mandate when the “limite” marking had been lifted and the documents made public on 6 December.1

Given the now public nature of the mandate, we would be grateful for a much fuller explanation of the substance of that mandate and of any text going to the Council for adoption so that we can report further to the House in advance of final adoption.

Transparency of any lobbying by third parties of the Council or COREPER could be important during a post-Brexit transition period when the UK itself is expected to have no formal influence on Council decision-making. We would be grateful if you could bear this important point in mind when you next updates the Committee.

17 January 2018

Food Standards Agency

No correspondence sent or received.

Foreign and Commonwealth Office

EU Annual Report on Human Rights and Democracy

Thank you for your letter of 14 September on behalf of the Committee on the thematic part of the EU Annual Report on Human Rights and Democracy in the World in 2015.

I shall be writing to you again with an assessment of the geographical part of the report when it is published later this year, including greater detail on EU activities in this area.

I am copying this letter to the Chairs of the Joint Committee on Human Rights, the Foreign Affairs Committee, the Women and Equalities Committee, and the Justice Committee.

23 September 2017

Letter from Alan Duncan to the Chair

EU Annual Report on Human Rights and Democracy in the World 2016

I am writing to give my assessment of the EU's Annual Report on Human Rights and Democracy in the World 2016, which was adopted by the Council as an outcome of proceedings on the 16 October. An electronic copy of the report is available here: https//eeas.europa.eu/sites/eeas/files/annual report on human rights and democracy in the world 2016 0.pdf

The report continues to be a comprehensive survey of the EU's activities on a number of thematic issues but also an assessment of the human rights and democracy situation in most countries f the world, emphasising the centrality of human rights, democracy and the rule of law in the EU's external activities, notably through the Global Strategy on foreign and security policy. It also gives a detailed account of the activities of the main financial instruments that have human rights as their core purpose or are an essential element of that instrument's conditionality.

I agree with the overall assessment of the report that the challenge to human rights and democracy, and the rule of law continues in many countries, in particular the space for civil society to operate in has become ever more pressured. To help mitigate, the EEAS increased the budget, in 2014, for the European Instrument for Democracy and Human rights whose main remit is to support civil society organisations, human rights defenders and election observation missions, as well as to simplify access to the . Organisations and individuals in over 100 countries have received support from the fund. The report also notes the threats to freedom of religion and Belief, (FoRB) - the banning of Jehovah's Witnesses in Russia for example and in May 2016 the EU established the position of a FoRB Special Envoy to engage with third countries.

The report notes that the EU is one of the biggest financial contributors in the world to transitional justice and the fight against impunity in conflicts. While this work is often undertaken in individual countries the EU has expanded this to regional organisations, notably the African Union which is

close to finalising its own transitional justice strategy, supporting local and regional actors in this way is fully in line with the UK's objectives.

At a local level the EU encourages EU Delegations and, where they are not present, EU Heads of Missions, to devise locally owned strategy; a with a few exceptions most countries with an imperfect human rights record, or challenges to the rule of law, have a locally adopted strategy. While based on the overall EU priorities this allows for local judgements to be made on what works and will lead to an improvement in the situation.

In the UN Human Rights Council and UNGA Third Committee the EU'S influence is significant and the UK continues to strongly influence EU positions, for example by raising the situation of LGBTI people in Chechnya and resisting attempts to neuter criticism of countries such as China and Egypt for their human rights record. As we move towards leaving the EU the UK will continue to play a full and active role, working in partnership with the European Institutions, to promote and protect human rights and democracy around the world.

In my assessment of the 2015 annual report and as reported to the Committee in November 2016, I regretted that there was little measurement of the impact of EU activities in the field of human rights, this is still the case. However, in my assessment of the mid-term review of the EU Action plan on Human Rights and following requests from the UK and others, acknowledged the need to devise a more systematic methodology for capturing not just the actions but also the results of the EU's human rights policies. I hope this is reflected in next year's report.

30 October 2017

Letter from the Chair to Alan Duncan

EU Annual Report on Human Rights and Democracy in the World 2016

The Committee has asked me to thank you for your letter of 30 October on the Annual Report for 2016.

The Committee was glad to hear that through UK influence the EEAS has recognised that the EU’s impact-related evaluation of EU activities in this field needs to be improved.

It also noted that the Government’s own Report on the UK’s own global activities in the human rights and democracy field in 2016 was published in July of this year. It is interesting to see that the report highlights the benefit of EU action in the same field as a way of amplifying UK impact and facilitating UK engagement with EU neighbourhood and accession states. In view of this, will the Government consider future cooperation with the EU in this field? If not, does the Government intend to intensify its own activities instead?

29 November 2017

Letter from Sir Alan Duncan to the Chair

Establishment of Permanent Structured Cooperation (PESCO)

Ahead of the launch of PESCO and bringing this formally to the Scrutiny Committee I thought it would be helpful to set out some of the background to this initiative and UK involvement to date.

PESCO is provided for in the Lisbon Treaty, introducing the possibility for EU Member States to strengthen their cooperation in military matters. In June 2016, when the EU agreed the European Global Strategy, the PESCO debate was relaunched with a call on member states to 'make full use of the Lisbon Treaty's potential'.

Under PESCO, groups of participating Member States can work together to pursue specific capability projects. PESCO is voluntary and works on an opt-in basis. In July this year, France and Germany released a draft notification letter to encourage participation by member States. There are plans to make PESCO projects eligible for up to 30% of their funding from the Commission's European Defence Fund. As a result, PESCO may increasingly become the primary avenue for military capability development between Member States.

In the margins of the 13 November Foreign Affairs Council with Defence Ministers (FAC(D)), 23 Member States signed an agreed notification letter (copy attached) marking the first step in the establishment of PESCO. The UK – along with Denmark, Ireland, Malta and Portugal – did not sign this notification.

The UK has supported the ambition of PESCO to develop military capabilities that address the shortfalls in EU and NATO contexts. As the Rt Hon Earl Howe affirmed at the |FAC(D), we welcome PESCO as a tool to support the development of capabilities that Europe needs for its security, provided it remains complementary to NATO and encourages EU-NATO cooperation. The UK approach reflects our continuing commitment to European defence and security, and protecting the interests of UK industry.

The UK has consistently said that if it is to be successful, PESCO must be designed in a way that strengthens the relationship with NATO and promotes an open and competitive European Defence industry. In line with our position, we are encouraging member states to develop PESCO to be open to third country participation, especially for the UK and our defence industry, where there is clear value in doing so. It is also important to us that projects carried out under PESCO arrangements should remain Member State-owned and that the capabilities delivered are available not only to the EU but can also be used in support of NATO and UN operations.

As PESCO develops, it is possible that projects are developed that the UK would find it beneficial to join. So we are looking into how the UK or UK industry might join projects in the future. This will be particularly important if, over the coming years, PESCO becomes the principal format for capability cooperation in the EU. This policy is still under development as detailed discussions on third party access have been deferred until after the launch of PESCO.

The Secretaries of State for Defence and Foreign and Commonwealth Affairs have joint interest in UK policy towards PESCO. The Secretary of State for Exiting the EU will also have an interest in how this initiative progresses as the UK leaves the EU.

In terms of next steps, the expectation is that PESCO will be officially launched at the December Foreign Affairs |Council |(11 December) via Council Decision, to then be endorsed at the December European Council (14 December). We received yesterday an informal draft version of the Council Decision text that has not yet been to the RELEX committee for discussion. As soon as I am able, I will update the Committee with a copy of the draft Council decision text to adhere to scrutiny processes.

23 November 2017

Letter from the Chair to Sir Alan Duncan

Permanent Structured Cooperation (PESCO) (39354) 14866/17

I am writing to thank you for your helpful letter of 23 November on the imminent launch of Permanent Structured Cooperation in the field of defence by 23 EU Member States.

The Committee has taken note of the truncated timetable you have described for the adoption of the Council Decision formally launching PESCO, which has meant we will not be able to scrutinise the document in detail before its adoption at the Foreign Affairs Council on 11 December. We accept that any resulting scrutiny override will be inevitable, given the very short period between the circulation of the draft Decision and the Council vote.

Given the importance of PESCO’s launch, both as a step towards a more unified EU approach to defence cooperation and in the context of the UK’s withdrawal from the EU’s foreign policy and defence structures, the Committee will want to give the Council Decision due consideration even after its adoption. We are also awaiting further information from the Ministry of Defence in relation to the European Defence Fund, which as you note is likely to fund the joint development of military technology under the PESCO umbrella.

More generally, in light of the possibility that the UK and EU will begin discussing their post-Brexit partnership early in the new year, we will expect the Government to provide substantially more detail than it has so far about its proposals for foreign policy and defence cooperation with the EU after Brexit. In particular, given the Committee’s remit, we need further clarity about the extent to which UK foreign policy might stay aligned with that of the EU; what kind of institutional mechanisms and representation are foreseen to facilitate the “deep and special partnership”; and how the autonomy of the UK’s foreign policy decision-making will be safeguarded.

In light of the imminent deposit of the PESCO Council Decision, there is no need to reply to this letter.

6 December 2017

Letter from Alan Duncan to the Chair

Joint Communication: Elements for an EU Strategy on Afghanistan (38937) 11482/17

Thank you for your note of 29 November, confirming that the European Scrutiny Committee have considered the above document and decided to clear it from scrutiny. I am replying to your request for further information on three issues.

UK and EU Objectives for Afghanistan

As the Explanatory Memorandum notes, the Joint Communication does not itself represent the full EU strategy. It sets out the views of the European Commission and the European External Action Service. Member States adopted Council Conclusions on Afghanistan at the October Foreign Affairs Council. These two documents together make up the new EU strategy.

It includes four objectives focusing on promoting peace, stability and regional security; strengthening democracy, the rule of law and human rights and promoting good governance and womens' empowerment; supporting economic and human development; and addressing challenges related . to migration. The first three objectives have been rolled over from the previous strategy. The objective on migration is new, reflecting the increased importance that EU Member States attach to this area.

UK objectives for Afghanistan mirror the EU objectives, though the UK focus is broader. The UK has two overall objectives, each broken down into sub-objectives. The first focuses on tackling direct threats to the UK (terrorism, organised crime and irregular migration). The second focuses on building support for a viable Afghan state, by boosting local capacity of fight the insurgency, by helping create the right incentives for a sustainable peace, by supporting the development of more mature and accountable democratic institutions, an.d by strengthening economic and fiscal sustainability.

EU/Afghanistan State Building Contract

The State Building Contract has a particular focus on · the implementation of Afghanistan government policies relating specifically to the management of public finances and anti-corruption. It is not linked to migration.

However, there is a separate EU/Development Cooperation Instrument proposal that is more relevant. A programme on the reintegration of returnees, signed in November 2016, was migration focused. It includes a €40m incentive package, funded through the Afghanistan Reconstruction Trust Fund and linked to budget support, with benchmarks related to the Government's own migration and returns policy.

Post-Brexit Cooperation with the EU on Foreign Policy Matters

WB work closely with the EU in Afghanistan and we ·expect that to continue post Brexit. On 12 September, the Government published a future partnership paper setting out our vision for future UK-EU cooperation on Foreign .Policy, Defence and Development. The paper reinforces the Prime Minister's message that the UK will

continue _to play a leading role as a global foreign policy and security actor after we leave the EU. We will also continue to support a strong, secure and successful EU that can help address our shared priorities. The future partnership paper sets out a

broad and innovative range of ideas that would enable us to continue to work together, including in Afghanistan . The ideas in our paper have been received positively by EU·partners. However, the precise institutional frameworks to deliver this deep an special partnership will need to be discussed in negotiations.

14 December 2017

Letter from Alan Duncan to Chair

EU Annual Report on Human Rights and Democracy in the World 2016 (39190)

Thank you for your letter of 29 November 2017 on behalf of the Committee, in which you asked for further information regarding· the future cooperation with the EU on human rights and democracy. ·

The Government supports the EU human rights strategy. The Prime Minister made clear in her Lancaster House speech on 17 January 2017 that the UK's decision to leave the EU did not mean that the UK was any less committed to working together with EU partners to ensure the security and prosperity of our citizens. The values we share are historic and deep-rooted in our societies, and the UK will always be an indefatigable advocate for them. The UK will therefore continue to work with the EU, EU Member States, and its allies around the world to develop and consolidate democracy, the rule of law, and respect for human rights and fundamental freedoms. As I have set out to the Committee previously, the precise mechanism for doing so and for future engagement with the EU and its allies is currently under consideration. However, I can assure the Committee that we will continue to promote universal human rights as an integral part of building prosperity and stability around the world.

14 December 2017

Letter from Chair to Sir Alan Duncan

EU Annual Report on Human Rights and Democracy in the World 2016 (39190)

The Committee has asked me to thank you for your letter of 14 December on the Annual Report for 2016.

10 January 2018

Letter from Sir Alan Duncan to the Chair

Council Decision (GFSP) 201711385 of 25 July 2017 amending Decision (CFSP)20151778 on a European Union military operation in the Southern CentralMediterranean (EUNAVFOR MED operation SOPHIA) (38918)

Thank you for sending the meeting results on 13 December, confirming that theEuropean Scrutiny Committee considered the above document and decided to clearit from scrutiny, but requesting further information on whether the Government willseek to remain a contributor to Operation Sophia post-Brexit, and on institutional andlegal frameworks.

I can confirm that it is my intention to keep the Committee informed of any further EUinitiatives to bring peace and stability to Libya, as well as the outcome of the next SixMonthly Review (SMR) of Operation Sophia, which will take place in the new year.Whílst the SMR is classified, and therefore I will not be able to share this, I will keepthe Committee informed of the gist and implications of the Review. I do not envisageany decision being taken regarding mandate extension in the context of the SMR.The Foreign Policy, Defence and Development discussion paper, published inSeptember 2017, set out the Government's vision of a deep and special partnershipwith the EU that goes beyond any existing third country arrangements, and whichbuilds on the breadth and depth of our shared interests and values. This could includecontinued UK-EU cooperation on CSDP missions and operations where they are ín ourmutual interest. The level of our engagement in CSDP, including in specific operationsand missions like Operation SOPHIA, will be part of the negotiations. lf it is agreed thatthe UK càn cooperate on CSDP operations and missions, we will need to establish anappropriate institutional and legal framework, which enabled the UK to work with theEU during mandate development and detailed operational planning. The level of UK involvement in the planning process should reflect the UK's contribution.

20 December 2017

Letter from Sir Alan Duncan to the Chair

Council Decision (CFSP) 201712264 of 7 December 2017 amending Decision2O14|219|CFSP on the European Union CSDP mission in Mali (EUCAP SahelMali). (39382)

I am writing with regard to the above Council Decision, which was adopted on 7December. lt authorised a financial reference amount of €28,450,000 to cover theexpenditure related to EUCAP Sahel Mali from 15 January 2018to 14 January 2019.As detailed in the attached Explanatory Memorandum, the Government supportsEUCAP Sahel Mali and in particular welcomes its focus on trafficking and organisedcrime.The Council Decision was adopted on 7 December, as the previous budget expiredon 14 January. I regret that I find myself in the position of having to agree to theadoptíon of this Council Decision before your Committee had an opportunity toscrutinise the document.

21 December 2017

Letter from Sir Alan Duncan to the Chair

Council Decision of 7 December 2017 amending Decision 2014l219lCFSP on the European Union CSDP mission in Mali (EUCAP Sahel Mali) (39382) (CFSP) 2017/2264

I am writing with regard to the above Council Decision, which was adopted on 7 December. It authorised a financial reference amount of €28,450,000 to cover the expenditure related to EUCAP Sahel Mali from 15 January 2018 to 14 January 2019.

As detailed in the attached Explanatory Memorandum, the Government supports EUCAP Sahel Mali and in particular welcomes its focus on trafficking and organised crime.

The Council Decision was adopted on 7 December, as the previous budget expired on 14 January. I regret that I find myself in the position of having to agree to the adoption of this Council Decision before your Committee had an opportunity to scrutinise the document.

4 January 2018

Letter from the Chair to Sir Alan Duncan EUCAP Sahel Mali: budget for 2018 (39382)

Thank you for your letters of 21 December 2017 and 4 January 2018 on the scrutiny override on Council Decision (CFSP) 2017/2264 of 7 December, which established the financial envelope for the EUCAP Sahel Mali mission for 2018.1

The Committee was disappointed that the Government overrode scrutiny on this proposal, without notifying it in advance that it felt unable to submit the document for scrutiny with sufficient time ahead of adoption by the Council. Moreover, the override does not appear to have been justified in this instance.

The need for a Council Decision to establish the Mission’s budget for 2018 has been known since January last year, when its previous financial envelope was established by the Council.2 In addition, the proposed Decision was circulated in its final form on 29 November and adopted by the Council

on 7 December, meaning expedited scrutiny of the proposal — or consideration of a potential override — would have been possible at our meeting of 6 December.

In the event, the draft budget was not submitted for scrutiny until 21 December. Neither your letter of 21 December or 4 January explains why the scrutiny process was handled in this way. Given the substance of this proposal, we have today cleared it from scrutiny despite our misgivings.

However, I hope you will be able to reassure the Committee that future CSFP documents will be drawn to the its attention before Council adoption, either by formal deposit — or, where exceptionally this is not possible — by letter or through contact with the Committee Clerk. We note in this respect that the possible post-Brexit transition period is likely to retain the UK’s financial contributions to CFSP missions beyond March 2019, meaning scrutiny of EU documents in this area remains important.

17 January 2018

Government Equalities Office

No correspondence sent or received.

Department of HealthNo correspondence sent or received.

Home Office

Letter to the Chair from the Minister for Policing and the Fire Service (Nick Hurd)

Cross-border law enforcement cooperation - UK Participation P r üm (37801)

Thank you for your letter of 7 December regarding UK's future participation in Prüm. I am sorry for the delay in my reply.

In your letter you compare the current assessment of EU security and law enforcement measures to the exercise undertaken by the Government during the Justice and Home Affairs (JHA) block opt-out decision in 2014. While I acknowledge this decision provides for a good reference point and an opportunity to consider the value of certain measures to the UK, it took place in the context of the UK's ongoing EU membership. Unlike the 2014 decision, the question now is not whether we wish to seek to re-join certain measures as a Member State. Instead, we need to consider how we should interact with the EU from outside the bloc

You go on to ask when the Home Office expects to conclude its review of security and law enforcement measures and if the findings will be published, in a similar way to the command papers you have highlighted from the 2014 decision. Again, unlike the 2014 decision, this analysis will feed into wider preparations for EU exit negotiations and any decision around publication would have to be made in that context.

Lastly, I would like to inform you that Prüm implementation continues and it is scheduled to be operational this year. The DNA pilot in 2015 provided immediate and substantial operational policing results. As such, proceeding with Prüm will provide benefits to national and cross-border policing and provide an operational basis on which to consider our continued participation.

20 July 2017

Letter from Chair to Minister for Policing and Fire Service (Nick Hurd)

Cross-border law enforcement cooperation — UK participation in Prüm (37801)

Thank you for your letter of 20 July in which you confirm that the Government is continuing to implement Prüm and expects it to be operational this year. We would be grateful if you could clarify whether all elements of Prüm, covering the exchange of DNA profiles, fingerprint and vehicle registration data, will be operational within this timescale. The Business and Implementation Case published in November 2015 indicated that it would take until the end of 2019 to complete all the connections needed to facilitate the exchange of data with EU partners.

When our predecessors wrote to you last December, they noted that the Home Office was examining “all areas of law enforcement and security cooperation to assess what capabilities EU measures deliver”. They urged the Government to publish the findings of its review, along with its assessment of the practical and operational utility of EU police and criminal justice measures and the various options available to the Government to secure continuing participation in them or other means of cooperation once the UK leaves the EU. 

We are disappointed that you give no commitment to make this information available to Parliament. The Government has published a future partnership paper, Security, law enforcement and criminal justice which says that Prüm delivers “significant operational benefit” for the UK and illustrates the type of capability that should be included in a new strategic partnership agreement with the EU. Whilst this paper helpfully sheds some light on the outcome the Government hopes to achieve in exit negotiations, it is no substitute for an evidence-based assessment of the operational value of the EU law enforcement and criminal justice measures in which the UK currently participates.

We ask you again to publish the findings of your review of EU capabilities in the law enforcement and criminal justice field and seek your assurance that Parliament will have the information it needs to ensure effective scrutiny of and accountability for the conduct and outcome of exit negotiations in the vital area of law enforcement and security cooperation.

13 November 2017

Letter from the Chair to the Immigration Minister (Brandon Lewis)

Commission progress reports on relocation and resettlement  (38940), 11530/17 and (39012) 12012/17 

Thank you for your Explanatory Memoranda on the Commission’s 14th and 15th progress reports on relocation and resettlement. Whilst we are content to clear them from scrutiny, we note that you do not explain how the Government has responded to the Commission’s request for new resettlement pledges for 2018. We understand that Member States were expected to submit their pledges by 15 September.

We ask you to set out the Government’s position, and its implications for future EU funding for resettlement to the UK, in your Explanatory Memorandum on the next Commission progress report due in October.

13 November 2017

Letter from Brandon Lewis to the Chair

Opinion of the Court of Justice of the European Union on the envisaged EU-Canada Passenger Name Records Agreement

In January 2016 the Chair wrote to the Minister for Security to request an analysis of the anticipated Opinion of the Court of Justice of the European Union in relation to the envisaged EU-Canada Passenger Name Records (PNR) Agreement. The European Parliament, the Court handed down its Opinion on 26 July1.

In summary, the Court found that the transfer from airlines operating from the EU to Canada of PNR data for all air passengers was appropriate for the purposes of the envisaged Agreement. This is very

1 http://curia.europa.eu/juris/documents.jsf?num=C-1/15

welcome as the Court could have taken a very different position to the rights of individuals in the context of the objective of ensuring wider public security. However the Court did conclude that the envisaged Agreement is defective, and cannot be entered into in its present form as the Court consider certain of its provisions go beyond what is necessary for the purpose of the envisaged Agreement – particularly in relation to the use and retention of PNR data by the Canadian authorities.

I have attached our analysis of the Court’s Opinion of the envisaged Agreement which sets out the implications of the Opinion and the processing of PNR generally. If you have any questions do let me know.

25 September 2017

Letter from the Chair to Brandon Lewis

Court of Justice Opinion on the EU-Canada Passenger Name Records (PNR) Agreement  

Thank you for your letter of 25 September. We are grateful for your helpful and informative analysis of the Court’s opinion. We understand that establishing a legally robust framework for the collection, processing and use of PNR data will be a priority for the Government during exit and future partnership negotiations with the EU. With this in mind, we ask you to explain: 

whether the EU PNR Directive is one of the security measures the Government would wish to apply during a transitional/implementation period, if this can be agreed with the EU;  

whether you expect the Commission to propose changes to the Directive to ensure it is compatible with the Court’s opinion and, if so, whether these changes would apply to the UK if adopted after the UK’s exit on 29 March 2019; and whether you envisage future arrangements for the collection, processing and use of PNR data forming part of a comprehensive treaty with the EU on security, law enforcement and criminal justice or being the subject of a separate PNR agreement with the EU

13 November 2017

Letter from Brandon Lewis to the Chair

Proposed Regulation amending Regulation (Schengen Border Code) ) as regards the reinforcement of checks against relevant databases at external borders (37448) 15397/15

In your letter of 25 April 2017 you asked to be kept updated on developments on the future immigration status of UK nationals travelling to and from the Schengen area and the impact of Brexit on checks at the Spain/Gibraltar border as the UK’s exit negotiations progress.

As you will be aware, Article 50 negotiations began on 19 June with an opening day of talks that focussed largely on the timetable and structure of the process. The UK and EU Commission delegations are meeting every four weeks and working groups have been established to support them in developing the detail. Both sides have been clear that reaching an early agreement on citizens’

rights is top of their respective priorities and one of the working groups will focus on this area. The second round of talks were held on 17 July and the next round is expected to take place in the last week of August.

The UK will continue to participate in discussions and I will keep you updated on progress in the specific areas you have highlighted. Meanwhile, the UK remains a full member of the European Union with all the rights and obligations of EU membership in force. We are working closely with the Government of Gibraltar and committed to on-going engagement as we prepare to leave the EU.

5 September 2017

Letter from the Chair to Brandon Lewis

Proposed Regulation amending Regulation (Schengen Border Code) as regards the reinforcement of checks against relevant databases at external borders (37448) 15397/15

Thank you for your letter of 5 September.

We share our predecessors’ interest in developments concerning the future immigration status of UK nationals travelling to and from the Schengen area and the impact of Brexit on checks at the Spain/Gibraltar border. We ask you to provide regular updates as the UK’s exit negotiations progress.

22 November 2017

Letter from Nick Hurd to the Chair

EUROPOL Regulation Government's post adoption opt-in decision (38252)

I am writing to respond to the questions raised by your Committee on the UK’s future relations with Europol after we exit the EU.

The details of our future cooperation in relation to justice and home affairs measures will be agreed in negotiations. Any provisions in the withdrawal agreement and the overarching treaty that we have proposed on security, law enforcement and criminal justice will be designed to enable the relationship we agree with the EU to operatively effectively.

7 December 2017

Letter from the Chair to Nick Hurd

Europol: the Government’s post-adoption opt-in decision (38252)

Thank you for your letter of 7 December 2017 responding to our Report chapter on Europol: the Government’s opt-in decision which we agreed at our first documents meeting of this Session on 13 November 2017.

We asked a number of questions which sought to clarify how the bespoke relationship with Europol which the Government envisages post-exit would differ from the UK’s current membership of Europol. Your letter does not address any of these questions, noting only that “any provisions in the withdrawal agreement and the overarching treaty that we have proposed on security, law enforcement and criminal justice will be designed to enable the relationship we agree with the EU to operate effectively”.

We do not consider that this constitutes a meaningful response to our questions or enables us to perform our scrutiny function effectively. The Committee has agreed that an evidence session with you exploring the Government’s plans for future security, law enforcement and criminal justice cooperation with the EU post-exit is likely to be more productive. As the Guidelines agreed by the European Council on 15 December indicate that a further set of guidelines on the framework for the future EU/UK relationship will be adopted in March and invite the UK “to provide further clarity on its position”, we suggest that the evidence session should take place once they have been issued. We will be in touch nearer the time to agree a suitable date.

10 January 2017

Letter from Ben Wallace to the Chair

Commission Communication: Eleventh progress report towards an effective and genuine Security Union (39145) 13478/17

I am writing to respond to the questions raised by your committee on the Government's EM on the European Commissions Eleventh security Union Progress Report.

Regarding your question on a possible "European Intelligence Unit", it is currently unclear what exactly the Commission envisions with this idea or how it intends to progress it. As such it is not currently possible to comment further t this stage. However, I can stress that the government has always been clear that national security should remain the sole responsibility of the Member States. It is the Government's view that the EU adds the most value to Member State's security when it helps facilitate coordination, cooperation and data sharing between Member States, rather than duplicating the existing capabilities of Member States. We will, of course, continue to monitor the situation closely.

Regarding the |Commission recommendation setting out guidance on immediate steps to prevent misuse of explosive precursors, this should have been deposited for scrutiny. It not being deposited was a mistake, for which I apologise. The Government has now deposited the document and will provide an explanatory memorandum shortly.

20 December 2017

Letter from the Chair to Ben Wallace

Commission Communication: Eleventh progress report towards an effective and genuine Security Union (39145) 13478/17

Thank you for your letter of 20 December. We are reassured that there are no concrete proposals to develop a “European Intelligence Unit”. We note that the Government intends to monitor the situation closely. We ask you to keep us informed of any developments.

10 January 2018

Letter from Nick Hurd to the Chair

European Public Prosecutor's Office (EPPO) Regulation: (35217), 12558/13 and (36931), 9372/15

I am writing to respond to the questions raised by your Committee on whether there is anything in the adopted Regulation that could adversely affect the UK's current participation in JHA measures or its ability to cooperate with the EU in such matters after the UK has left the EU.

The Government has set out its position in a future partnership paper on security, law enforcement and criminal justice cooperation with the EU published on 18 September 2017.

As the EPPO is not expected to become operational until after the UK has exited the EU, we do not expect the adopted Regulation to affect the UK’s current participation in JHA measures.

The details of our future cooperation in relation to justice and home affairs measures including the EPPO will be subject to our exit negotiations. However, it is our intention that the withdrawal agreement and the overarching treaty that we have proposed to support future cooperation on security, law enforcement and criminal justice will enable a high level of continued effective operational collaboration with EU partners in this area.

12 January 2018

Letter from the Chair to Nick Hurd

European Public Prosecutor’s Office (EPPO) Regulation: (35217), 12558/13 and (36931), 9372/15

Thank you for your letter of 12 January.

The Committee has no further questions about EPPO at present and as you know, the relevant documents were formally cleared from scrutiny in December.

24 January 2018

Inland Revenue

No correspondence sent or received.

Department for International Development

Letter from The Lord Bates to the Chair

Thank you for your letter dated 22 November requesting information on the UK's future cooperation with the EU including: the implementation period, contingency planning for a 'no deal' eventuality, and our future partnership with the EU on development policy.

As I'm sure you will understand, many of the issues you raise in your letter, including the specific arrangements for any implementation period and contingency plans, remain subject to the ongoing negotiations and will be a matter for the withdrawal agreement as part of the Article 50 process. I am therefore not at liberty to respond in great detail at this stage. Once the Phase 1 negotiations have concluded I will be in a position to respond more fully to the questions in your letter. The UK intends to reach a fair financial settlement with the Eu in accordance with the law and the spirit of our continuing partnership, this includes for development funding. The Prime Minister has reassured me our EU partners that they will not need to pay more or receive less money over the remainder of the current budget plan.

You asked for more information on the government's plans for our future partnership that goes beyond existing third country arrangements, and which builds on the breadth and depth of our shared interests and values. We are open to discussing with our European partners how we can best work together on development after we leave the EU. The specific arrangements for our partnership with the EU will be discussed in Phase II of the exit negotiations with the EU, however they are also subject to the outcome of parallel negotiations between the 28 EU Member States on the successor to the Cotonou Partnership Agreement and the EU's development financing instruments from 2021.

If the UK were to participate financially in EU funding instruments after we leave the EU, then these would first need to be opened up to non-member States. There are no current proposals for an EDF 12. The UK is engaging fully in the discussions about the instruments that will succeed negotiations between the 28 member States on the successor to the Cotonou partnership Agreement and the EU's development financing instruments from 2021. We are engaging fully in these discussions.

Lastly on your question of how the government intends to translate its pledge to use Brexit to free up trade with the world's poorest countries into concrete policy; The government continues to deliver support to developing countries by helping them break down the barriers to trade, supporting critical trade infrastructure like ports and roads, and building trade skills in those countries, so that they can take better advantage of trading opportunities. Once we are an independent trading nation I want to see the UK at the heart of global co-operation on trade, which recognises the progress that trade has delivered for the world's poorest, and commits to sharing those benefits further.

In addition to replicating the effects of Economic Partnership Agreements (EPAs), we will put in place a UK trade preferences scheme for developing countries as we leave the EU. Out plans for this have been set out in the taxation (Cross-Border Trade) Bill. The UK scheme will, as a minimum, provide the same level of access as the current EU trade preference scheme. This will maintain tariff free access for Least Developed Countries and continue to offer generous tariff reductions to around

25 developing countries. In the future we will look to improve our trade preference scheme by making it even more generous and easy to use.

7 December 2017

Letter to Lord Bates from the Chair

UK cooperation with the EU on development policy post-Brexit

I write to thank you for your response dated 7 December to our letter on the Government’s approach to working with the EU after Brexit on development policy.

As you will be aware, the day after you replied the Government and the European Commission jointly issued a report marking the end of Phase 1 of the negotiations under Article 50 TEU. This makes clear that the Government has committed to make contributions into the EU budget and the European Development Funds until the UK’s share of commitments made under the entire 2014-2020 budgetary cycle have been paid.

However, serious questions remain about the Government’s ability to effectively oversee how the EU spends its development assistance budget after March 2019, when the UK will lose its seat on the Council. Similarly, the UK’s status under treaties and agreements with developing countries to which it is a party by virtue of its EU membership is still not guaranteed.

The Committee would therefore like to accept your kind offer to provide a fuller reply to our original letter of 22 November in light of the agreement of 8 December. In addition to the questions we already put to you, we would like you to clarify:

Whether the provision in the Joint Report on new “governance arrangements” of the EDF to accommodate the UK after it ceases to be a Member State were inserted at the Government’s request;

what sort of governance arrangements the Government intends to propose during Phase 2 of the negotiations so that it can ensure the EDF continues to represent value for money for the UK taxpayer;

whether the Government will seek a change to the modalities of payments into the EDF compared to the current situation, for example by frontloading outstanding contributions under the 11th Internal Agreement before March 2019; and

what progress the Government has made in ensuring that agreements between the EU and developing countries remain in effect for the UK to the extent considered necessary when the Treaties cease to apply on 29 March 2019.

We would also be grateful for any more detailed information you can provide on the Government’s proposals for the new “deep and special partnership” with the EU on international development after the transitional period. Given that such matters will be discussed as part of the negotiations on the “framework for future relations” in Phase 2, it would be proper for Parliament to be aware of the Government’s proposals.

Given the impending Christmas recess, the Committee would be content to receive your reply by the end of January.

19 December 2017

Department for International Trade

No correspondence sent or received.

Ministry of Justice

No correspondence sent or received.

Office of National Statistics

No correspondence sent or received.

HM Revenue and Customs

No correspondence sent or received.

Department for Transport

No correspondence sent or received.

HM Treasury

Letter to the Chair from Stephen Barclay

EM Proposal for a Regulation of the European Parliament and of the Council Laying Down Common Rules on Securitisation and creating a European Framework for Simple, Transparent and Standardised Securitisation and Amending Directives 2009/65/EC, 2009/138/EC, 2011/61/EU and Regulations (EC) NO 1060/2009 AND (EU) NO 648/2012; Proposal for a Regulation for a European Parliament and of the Council amending regulation (EU) NO 575/2013 on Prudential Requirements for Credit Institution and Investment Firms (37128) (37143) 5623

I am writing to provide an update on the Securitisation proposals. Political agreement was reached between the Maltese Presidency, the European parliament and the Commission in the final trilogue on 30th May and that deal is likely to be voted on by Ministers in council later this year.

The exact timing of any vote is uncertain, but our Ambassador indicated at COREPER on 28 June that we would be minded to support agreement on the file as the outcome has met the broad objectives we previously set out to Parliament. However, we did jointly lay a written minute statement with our German colleagues, which expressed our shared financial stability concerns regarding a specific deviation from Basel standards and called for the ongoing scrutiny of any unintended consequences. A copy of that statement is annexed and will be reissued alongside the final vote.

The financial stability concerns referenced in the minute statement relate specifically to the proposal from the European parliament (EP) to diverge from Basel on the calculation of regulatory capital. The divergence pertains to the ‘hierarchy of methods’ issue which we have informed the scrutiny committees of previously. This relates to how banks calculate capital against the risk of securitisations that they hold. Basel standards allow firms to use internal models (SEC-IRBA). If they cannot use internal models they should use a simpler calculation making use of external credit ratings (SEC-ERBA). If a rating is not available then they should use the standardised approach (SEC-SA), which is another lighter touch calculation with defined inputs.

The European Parliament’s position ‘inverted’ this hierarchy. The reason for the inversion is that there are areas where if you have ‘bad’ credit rating, then risk weighted assets of higher RWAs is felt primarily by Southern Member States, as credit rating agencies (CRAs) routinely apply a sovereign cap to securitisations and debt issued. Therefore a Southern European bank may feel it has done sufficient credit enhancement to get an AAA rating, but if its sovereign is rated at BB+ the bank would be capped at the same rating.

We feel that the sovereign cap is broadly justified, reflecting the risk of default in the institution. However, we acknowledged that in some circumstances the outcome can be overly punitive, such has for senior tranches of secured debt like mortgages which have a low risk of failure. The outcome

therefore has the material impact of disadvantaging institutions from low rated sovereigns – their securitisations lead to investors having to hold more capital, and will be priced to that effect.

In negotiations, working closely with other member states, we achieved our objective of ensuring that the bank of England had sufficient supervisory flexibility to mitigate risks domestically, so that the proposals are not detrimental to financial stability.

Nonetheless, the Government felt that it was appropriate to voice our concerns with the deviation from Basel through the statement.

The other aspects of the proposals met the Governments negotiating objectives in the following ways.

The proposals provide sufficient certainty to markets participants and to regulators. The definitions, obligations of issuers and investors, role of supervisors and other issues that support market certainty are well defined and supported by industry and competent authorities.

We can confirm that the securitisation framework is supervised by national Competent Authorities (NCAs) rather than EU supervisory agencies. Importantly the self-certification regime will be enforced by NCAs, ensuring an appropriate balance of supervisory responsibility and issuer liability. This prevented a greater supervisory role for the European Securities and Markets Association.

We have worked hard to successfully oppose disproportionate requirements, by removing and watering down proposals from the EP that would have materially increased regulatory burdens without commensurate benefits. These include maintaining the current risk retention rules at the international standard of 5% and making reporting burdens more palatable.

We have managed to achieve a good outcome for third country investors, removing restrictions introduced by the EP. Trilogue negotiations saw the removal of the EP’s proposed third country equivalence regime for STS securitisations. Council did not agree to this addition as negotiations on this issue became wrapped up in wider debate around Brexit and the unspoken expectation, to an extent driven by the Commission, was that these issues should be addressed across the financial services acquis rather than in individual files or as part of UK exit negotiations.

Regarding the JHA provision, as previously outlined to the scrutiny committees, the UK government made a decision not to opt-in in line with our consistent application of the JHA opt-in. Our view is that this opt-in decision only applies to the specific provision and not the wider proposal. This was communicated to Parliament through a Written Ministerial Statement laid by Harriet Baldwin on 27 January 2016. As mentioned before we have previously communicated our decision to the EU institutions in December 2015. Upon final adoption, expected later in the year, the UK will lay a formal minute statement on our JHA position.

11 July 2017

Letter from the Chair to Stephen Barclay

Securitisation Regulation: UK opt-out under Protocol 21 (37128) 12601/15

 Thank you for your letter of 11 July1 on the two proposals of the European Commission’s securitisation package.2 We are grateful for the detailed overview it provided of the content of the Regulations as agreed in the trilogue negotiations.3

In December 2015, the Government informed our predecessors that it had concluded that the UK’s opt-in for Justice & Home Affairs matters under Protocol 21 applied to Article 19(2) of the proposed Securitisation Regulation (Article 34(2) in the trilogue agreement), because it would require Member States to ensure their competent authorities under the Regulation can obtain information from the relevant criminal justice agencies and the courts about criminal proceedings relating to breaches thereof.4 It would also give the competent authorities the power to share any such information received as necessary with other Member States, and with the EU’s supervisory authorities EBA, EIOPA and ESMA. 

The Commission proposal has as its legal base Article 114 TFEU. No additional Title V legal base was inserted by either the Parliament or the Council. As such, the Committee reiterates that it does not agree with the Government that Protocol 21 applies in this case. We previously communicated this to your predecessors in December 2015,5 January 2016,6 and most recently by letter in February 2017.7 We therefore consider that the Regulation will apply to the UK in its entirety.8 

The Government confirmed its intention to purport to opt-out of what is now Article 34(2) of the Regulation in its Written Statement of 27 January 20169  It said that there would be no “significant benefits” from opting in, because “UK competent authorities will be in a position to access [information relating to criminal proceedings for breaches of the Securitisation Regulation] irrespective of the decision to opt in. The Government has no intention to introduce a criminal sanctions regime in a way that would lead to this Regulation imposing an obligation on UK or on our competent authorities”. 

We would ask you to clarify whether: 

The UK provides, or will provide, for criminal sanctions for breaches of the Securitisation Regulation as listed in Article 32(1) of the text as agreed in trilogues;

The UK already, in substance, meets the requirements of Article 34(2) on information sharing between the competent authorities, criminal justice agencies and the judiciary, irrespective of any future legal obligation under the Regulation;

The competent authorities in the UK can share information received from criminal justice agencies or the judiciary with authorities in other Member States, and the EU’s supervisory authorities;  

The Government is considering seeking annulment of Article 34(2), because it requires a Title V legal base; and

If not, whether the Government considers itself bound by this provision.10

We would also welcome confirmation from you at the earliest opportunity on whether the UK will vote in favour of the proposals when they come to the Council for their formal adoption later this year. I look forward to receiving your response by 24 November. 

13 November 2017

Letter from Chair to Stephen Barclay

Assessment of anti-money laundering measures

Report from the Commission on the assessment of the risks of money laundering and terrorist financing affecting the internal market and relating to cross- border activities (38887) 10977/17

Thank you for your Explanatory Memorandum of 29 August on the European Commission’s supra-national risk assessment (SNRA) on money laundering and terrorist financing under the 4 th Anti-Money Laundering Directive (AMLD).1

The Committee is grateful for your detailed assessment of the various recommendations from the Commission to the Member States, and how they relate to the steps already taken by the Government to address the risks of money-laundering and terrorist financing. We have now cleared the document from scrutiny. However, we have two issues on which we seek further information from you.

Firstly, based on your Memorandum, it appears to us the Government does not consider that any UK follow-up actions are necessary to comply with the Commission’s recommendations to the Member States. Article 6(4) of the AMLD requires Member States, if they decide to not implement one or more of the mitigating measures recommended, to justify that decision to the Commission for each such measure.

I would be grateful for your confirmation that, in the Government’s view, no further measures are necessary in the UK in response to the SNRA. If not, could you please specify what further changes are foreseen to the way in which the Directive and its transposing regulations are currently applied in the UK in light of the Commission report.

Secondly, the Committee wish to clarify certain matters relating to the Commission’s specific recommendations to the Member States on the registers of beneficial ownership.

As you know, the 4th AMLD required each EU Member State to create and maintain a register of beneficial ownership of companies from June 2017, which must be accessible to anyone who demonstrates a “legitimate interest”. A similar register, not required to be publicly accessible, must be kept for certain express trusts generating tax consequences.

In the SNRA report, the European Commission recommends that, to ensure accuracy of the information on beneficial ownership, “the information in the registers [is] verified on a regular basis” by a designated national authority. If the beneficial ownership identified by the authority is different from the information collected by an obliged entity under the Directive, the latter should face an “adequate pecuniary and/or administrative sanction” unless the discrepancy is justified by the legal structure of the company or trust.

In light of this, we would ask you to clarify:

Whether any form of independent verification of the information on beneficial ownership on the PSC Register and the Trusts Register takes place or is planned to take place by Companies House or HMRC;

If so, the total resources made available by Companies House and HMRC for carrying out such independent verification of information held on:

The Registers;

Whether the Government believes further steps are necessary to ensure that information on beneficial ownership of UK entities is verified independently on a regular basis, as recommended by the Commission in section 4.3 of the SNRA report; and

If not, why the current mechanisms for verification are sufficient for the UK to comply with the Commission's recommendations under Article 6(4) AMLD.

I look forward to receiving your response. The Committee has separately considered your latest letter on the proposal for the fifth AMLD, and our Report will be sent to you shortly.

22 November 2017

Letter from Elizabeth Truss to the Chair

Re: EU Finances|: Draft Budget for 2018 and future of the EU; Budget Statement of estimates of the European Commission for the Financial Year 2018

EM (39196) 13265/17 Amending letter No 1 to the Draft General Budget 2018 and EM (28286) 10812/17

Thank you for sharing the conclusions of your Committee’s meeting on 13 November, where the EU annual budget for 2018 was discussed. You asked a number of questions about the proposals. Update from Budget ECOFIN:

1. Firstly, let me update you on the outcome of Budget ECOFIN on 17 November, where the UK continued to work hard – in collaboration with likeminded member states – to promote budgetary restraint and discipline. After lengthy talks, the Council, Commission and Parliament reached a deal on the 2018 EU Budget in the early hours of 18 November. The three institutions agreed that the overall level of commitment appropriations for 2018 will be €160.1bn (£140.7bn), leaving a margin below the MFF ceiling of €1.6bn (£1.4bn). The overall level of payment appropriations for 2018 will be €144.6bn (£127.0bn), leaving a healthy margin of around €11bn (£9.7bn). The Parliament and Council have 14 days from Budget ECOFIN to formally adopt the final deal.

2. Overall, the final deal is lower than both the European Parliament’s proposal and the Commission’s amended draft budget. Despite this, the UK indicated a preference to abstain on the final vote, as we did at the Council vote in September, on the basis that we have consistently argued for further commitments cuts across all headings and a higher commitments margin to allow space in the budget to respond to the uncertainty facing the EU. The commitments savings in the final deal were not sufficient and indeed less than the Council’s proposal. However, as progress was made, the UK recognised this by not indicating a preference for voting against.

3. Discussions on the EU’s annual budget for 2018 take place in the context of the UK’s negotiations on withdrawal from the EU. While we bear this in mind, these matters are separate and, until exit negotiations are concluded, the UK remains a full member of the EU and all the rights and obligations of EU membership remain in force. The Government has been clear that it will continue to negotiate, implement and apply EU legislation during this period, including on the EU budget.

The draft 2018 budget:

4. In addition to the above, the Committee asked several detailed questions about the proposals.

5. On the question regarding the margins under Headings 1 and 3, the UK has been clear that across all headings a higher commitments margin is needed to allow space for the budget to respond to uncertainty facing the EU.

6. On the use of the Flexibility Instrument, the UK has long argued for flexibility in the EU budget to enable the EU to address changing priorities and deal with urgent needs, such as migration. This is provided Member States are not asked to pay for more than they signed up to as part of the 2013 Multiannual Financial Framework deal. The Government supports action to deal with urgent priorities, such as migration, but the response needs to be financed within the MFF ceilings, including through redeployments from other, lower priority programmes.

7. The UK’s position contrasts with the European Parliament’s call to increase appropriations under Heading 3 to their 2017 levels, without redeployments from other areas of the budget. Increases in this budget area in 2017 were not utilised fully and instead returned in Draft Amending Budgets 5 and 6 (DABs 5 and 6). Adjusting the 2018 budget to avoid such in-year reductions is sensible.

8. In relation to the reductions in commitments under the Asylum, Migration & Integration Fund (AMIF) in 2018, this follows on from reductions to payments for the fund in DAB 6 in 2017. The 2017 adjustments are proposed to set a more realistic, deliverable figure that can be fully utilised following lower than expected declaration of payments by managing authorities to date (however, spending on the ground is reported to be steady). In view of the delays of the new Dublin IV Regulation, in 2018, a significant amount of AMIF reallocations will be used to invest in specific activities such as increasing the operational capacity for integration, improving cooperation on return/readmission within third countries and enriching the equipment pool available to the European Border and Coast Guard Agency.

9. You also asked about the Youth Employment Initiative (YEI). This was recently extended for the period 2017-20, on the basis that youth unemployment was considered a pressing issue in large parts of the Union, and the scheme warranted extension because of encouraging results in its first three years. The dedicated budget for the YEI was increased by €1.2bn (£1.1bn) to 2020. The UK will not directly benefit from the increase in the YEI budget as the scheme is focused in regions that are hardest hit by youth unemployment. As well as indicating a preference to abstain on the budget as a whole, the UK did not sign up to the joint statement welcoming the increased resources for this initiative – in line with our wider approach to the EU budget.

10. Finally, you asked about Horizon 2020. The UK fully supports the policy principles behind Horizon 2020 and remains committed to encouraging international collaboration to ensure excellence in scientific research. Whilst the Council proposed cuts in this area, the overall level of funding suggested by Council still represented a real term increase in both commitment and payment appropriations for Horizon 2020 in comparison to 2017’s budget. In the final agreement on the 2018 budget, commitment appropriations were set €110mn (£96.7mn) higher than the Commission’s amended draft budget.

11. I hope that the above adequately address the Committee’s questions on the draft budget, and would ask that the Committee considers lifting this file from scrutiny before final adoption later this month.

Implications of Brexit:

12. The Committee also asked a number of questions on the arrangements for withdrawal from the EU.

13. The Government said it does not want our partners to fear that they will need to pay more or receive less over the remainder of the current budget plan as a result of our decision to leave, and that the UK will honour commitments we have made during the period of our membership.

14. As the Secretary of State for Exiting the EU noted in his closing remarks after exit negotiations on 9 and 10 November, we are currently making progress in building a common technical understanding on every item. The UK remains ready and willing to engage as often and as quickly as needed over the weeks remaining before December European Council to move our discussions onto our future relationship.

15. I appreciate that you have asked some more detailed questions on aspects of the UK position of the negotiations, on which I have not elaborated in detail. Many of the future arrangements you ask about are currently under negotiation as part of the Article 50 process. I am sure you will appreciate that I am not able to provide a detailed commentary on such aspects of the negotiations at this time. The Government is committed to updating Parliament as negotiations progress and I look forward to being able to keep the Committee up-to-date.

29 November 2017

Letter from the Chair to Elizabeth Truss

General EU budget for 2018: request for scrutiny waiver (38836) SEC(17) 250

I am writing in response to request for a scrutiny waiver in relation to the general EU budget for 2018,1 which is due to be voted on at the Competitiveness Council on 30 November.

The Committee has decided to grant this request. We will consider the budget again in the coming weeks in light of your reply to our questions regarding Horizon 2020, the Youth Employment Initiative and other spending commitments.

You will be aware that we also raised a number of issues with respect to the Article 50 settlement and its links to commitment appropriations under this new annual budget. We appreciate that the negotiations are at a particularly sensitive time. However, in light of press reports that a preliminary agreement on the settlement has been reached, we expect to pursue this matter with you further following the European Council of 14 and 15 December.

29 November 2017

Letter from Mel Stride to the Chair

EM:(a) Proposed Council Directive amending VAT legislation; (b) Proposed Council Implementing Regulation concerning the VAT Directive; (c) Proposed Council Regulation about administrative cooperation and combating fraud concerning VAT. (38341) 14820/16, (38342) 14821/16, (38343) 14822/16

I am writing ahead of the ECOFIN of 7 November to provide an update on the European Commission’s VAT in the Digital Single Market proposals, which aim to update VAT rules for the digital age.

As indicated in my previous letter of 24 October, and after an intensified period of discussions, the Estonian Presidency will seek agreement on a general approach at the November ECOFIN.

From a UK perspective, the latest compromise text stabilises discussions on several UK asks and offers a reasonable compromise on previously outstanding issues.

In the first tranche of changes, the Government’s key ask for a threshold for individuals and small businesses selling digital services cross-border has been retained. The latest compromise text also includes further simplification to invoicing rules and evidence keeping requirements, both of which had previously been the subject of representations from UK business.

In the second tranche, the text includes a legislative commitment to deem marketplaces liable for VAT in the two scenarios outlined in the Government’s earlier letter. While all Member States had previously recognised that marketplaces had a role to play in the collection of VAT, it was accepted that this was a complex change requiring further work. Positively, and in response to the UK’s efforts on the issue, the Presidency will now also seek agreement on a joint Commission and Council statement to the ECOFIN minutes which will reflect the Council’s desire for the Commission to engage with business during work on the Implementing Regulation.

Given the UK’s desire for legislative changes that will help to ensure tax revenue collection for Member States in the digital age and the positive balance struck in the latest compromise text, the

Government intends to signal the UK’s support for agreement on a general approach at the November ECOFIN.

I recognise that the timing of negotiations is unfortunate as your Committee has not been able to consider progress on this file for several months, and that agreement will regrettably constitute a scrutiny override. I would like to re-iterate the Government’s commitment to the parliamentary scrutiny process. As was highlighted in the previous letter to your Committee, any agreement on a general approach will be followed by further legislative proposals ahead of implementation. These subsequent proposals will be subject to scrutiny in the usual way.

6 November 2017

Letter from Mel Stride to the Chair

EM: (a) Proposed Council Directive amending VAT legislation; (b) Proposed Council Implementing Regulation concerning the VAT Directive; (c) Proposed Council Regulation about administrative cooperation and combating fraud concerning VAT. (38341) 14820/16, (38342) 14821/16, (38343) 14822/16

I am writing ahead of the ECOFIN of 7 November to provide an update on the European Commission’s VAT in the Digital Single Market proposals, which aim to update VAT rules for the digital age.

As indicated in my previous letter of 24 October, and after an intensified period of discussions, the Estonian Presidency will seek agreement on a general approach at the November ECOFIN.

From a UK perspective, the latest compromise text stabilises discussions on several UK asks and offers a reasonable compromise on previously outstanding issues.

In the first tranche of changes, the Government’s key ask for a threshold for individuals and small businesses selling digital services cross-border has been retained. The latest compromise text also includes further simplification to invoicing rules and evidence keeping requirements, both of which had previously been the subject of representations from UK business.

In the second tranche, the text includes a legislative commitment to deem marketplaces liable for VAT in the two scenarios outlined in the Government’s earlier letter. While all Member States had previously recognised that marketplaces had a role to play in the collection of VAT, it was accepted that this was a complex change requiring further work. Positively, and in response to the UK’s efforts on the issue, the Presidency will now also seek agreement on a joint Commission and Council statement to the ECOFIN minutes which will reflect the Council’s desire for the Commission to engage with business during work on the Implementing Regulation.

Given the UK’s desire for legislative changes that will help to ensure tax revenue collection for Member States in the digital age and the positive balance struck in the latest compromise text, the

Government intends to signal the UK’s support for agreement on a general approach at the November ECOFIN.

I recognise that the timing of negotiations is unfortunate as your Committee has not been able to consider progress on this file for several months, and that agreement will regrettably constitute a scrutiny override. I would like to re-iterate the Government’s commitment to the parliamentary scrutiny process. As was highlighted in the previous letter to your Committee, any agreement on a general approach will be followed by further legislative proposals ahead of implementation. These subsequent proposals will be subject to scrutiny in the usual way.

6 November 2017

Letter from the Chair to Mel Stride

VAT e-commerce package request for scrutiny waiver (38341) 14820/16: (38342) 14821/16: (38343) 14844/16

I am writing in response to the request for a scrutiny waiver, dated 23 November, in relation to the VAT e-commerce package1 which is due to be considered at the ECOFIN Council on 5 December.

The Committee has decided to grant this request. We will decide on fully clearing these documents from scrutiny in light of your reply to the questions we raised in our Report of 22 November 2017.

29 November 2017

Letter from the Chair to Stephen Barclay

Emir Refit

Thank you for your letter of 11 December on the deliberations within the Council of the EU on the proposal to amend Regulation 648/2012 on OTC derivatives (EMIR REFIT).1

The Committee have taken note of the imminent adoption of the trilogue mandate at COREPER, in which the Government's main concerns with respect to the new Regulation appear to have been addressed satisfactorily.

We would like to receive a copy of the mandate as soon as it becomes available, accompanied by an explanation of the Government's position on it. Given the legislative importance of this file, the scrutiny reserve will continue to apply after the COREPER meeting, and the Committee will report back to the House on the substance of the Council position early in the new year.

19 December 2017

Letter from Stephen Barclay to the Chair

Proposal for a Regulation on the procedures and authorities involved for the authorisation of CCPs and requirements for the recognition of third-country CCPs (38840) 10363/17

Thank you for your report of 23rd November 2017, in which the Committee confirmed that it supported the approach being taken by the Government. The report stated that the Committee would continue to hold the EMIR REFIT file under scrutiny in anticipation of updates from the Government on the progress of the negotiations within the Council and the European Parliament.

Updates on the progress of negotiations

The discussions on the file have progressed since the proposal’s publication in May, with the Estonian Presidency pushing for a compromise across Member States within the Council. These discussions are of a sensitive nature as it concerns the positions of other Member States, the Commission and the UK’s negotiation strategy and therefore I am not able to disclose further information on these negotiations. However, I can confirm that we anticipate that a Council compromise text will be voted upon and then published by the end of December 2017 or early 2018.

The European Parliament have had one meeting so far on the EMIR REFIT file. I anticipate that these discussions will pick up in the new year with the first Parliament report arriving in early 2018.

I hope this letter provides the Committee with sufficient information and I am happy to provide further details to address any additional questions the Committee may have. I would be very grateful if the Committee could clear this proposal from scrutiny ahead of the upcoming vote on the Council text.

11 December 2017

Letter from Mel Stride to the Chair

Proposal for a Council Directive AM Ending Directive (EU) 2011/1 6/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (38863) EM 10582/17

Thank you for your report of 13 November on the above proposal, following our Explanatory Memorandum on 6 July.

The committee asked when the OECD work on hallmarks is likely to be completed and the effect on the adoption of the Directive. It is difficult to predict the progress of international negotiations but we expect the OECD work to be completed in the first half of 2018. This could help inform the EU work which could potentially conclude to a similar timetable. Either way, while the processes are running in parallel, the UK will continue to emphasise the importance of alignment between the EU and OECD.

The committee asked about the effect of the UK's exit from the European Union and a potential transitional arrangement on transposition. The Government has proposed a time-limited period for implementation. Until negotiations on a transition period are complete it is difficult to speculate on its details.

The committee also highlighted the value of exchange of information between tax authorities. As demonstrated through the country-by-country reporting and Common Reporting Standard initiatives, information exchange is vital in combatting avoidance and evasion. As with many areas, the terms of the UK's access will form part of the wider EU exit negotiations. All 28 Member States have access to the Common Communication Network (CCN) and it is possible for non EU countries to gain access for an annual fee.

12 December 2017

Letter from the Chair to Mel Stride

Exchange of tax information: disclosure by intermediaries

Thank you for your letter of 12 December with further information on the European Commission proposal to amend the Directive on Administrative Cooperation between the EU’s national tax authorities (the MDR proposal).1 We have also taken note of your separate response to questions put by the House of Lords EU Committee in respect of the same document.

OECD standard on cross-border tax arrangements

As regards the links between the OECD’s standard on cross-border tax arrangements and the Council’s deliberations on this proposal, it was useful to learn that both processes might be completed to “a similar timetable” this summer.

We would be grateful if you could keep the Committee informed of deliberations within the Council, especially as regards the level of alignment of the Directive with the OECD work and the ability of the Commission to modify the “hallmarks” list using delegated powers. The Committee will want to consider any final political agreement in good time ahead of a formal vote.

Post-Brexit transitional period

With respect to the post-Brexit transition period, the Committee took note of the fact that the European Council’s latest guidelines for the Article 50 negotiations foresee only an arrangement under which the UK “will

continue to participate in the Customs Union and the Single Market”, subject to EU law as it applies to Member States (including legislation that only becomes applicable during the transitional period).2

The Government’s position on the scope of the transitional arrangement remains unclear.

Until we are made aware of credible counter-proposals by the Government for the scope of the transition, the Committee will apply scrutiny under the assumption that new EU legislation that enters into force between March 2019 and December 2020 will have to be applied in the UK. That would include any requirement under this new Directive for intermediaries to report cross-border tax arrangements to HM Revenue and Customs, if it is approved by the Council.

Common Communication Network

Lastly, the Committee is grateful for your clarification that non-EU countries can request access to information held on the EU’s Common Communication Network (CCN) on taxation and customs, in return for a financial contribution.

It would be helpful if you could specify what types of information the EU currently shares with third countries under similar arrangements,3 to give the Committee an indication of the precedent on which the Government could build. The Committee would like to receive this information by the end of January, so it can inform further scrutiny work on the MDR Directive.

10 January 2017

Letter from Stephen Barclay to the Chair

Proposal for a Regulation of the European Parliament and of the Council to amend the regulations governing European Venture Capital Funds (EuVECA) and European Social Entrepreneurship Funds (EuSEF): (37956) 2017 11303/16

Thank you for your report of 22 November, regarding the European Venture Capital Fund (EuVECA) and European Social Entrepreneurship Fund (EuSEF) Regulations. I am writing in response to the Committee's questions set out in the report.

Firstly, the Committee asked for an assessment on the potential impact of UK-registered EuVECA funds active in other Member States, if the government cannot reach an agreement with the EU allowing the continued use of the EuVECA categorisation and passport.The impact of the UK's withdrawal from the EU on UK-registered EuVECAs is subject to future negotiations. However, in a no-deal scenario, UK-registered EuVECA funds (29 as at May 2017) would, from an EU perspective, lose their categorisation and become thi rd-country Alternative Investment Funds (AIFs) governed by the Alternative Investment Fund Managers Directive (AIFMD). This is because, according to the underpinning EU regulations, EuVECA funds must be EEA domiciled and managed by an EEA based manager.

The AIFMD does include a "third country passport" provision for thi rd countries to access the EU's AIF market. Until the passport is switched on, each Member State can choose whether to allow third country AIFs to be marketed in their State, including the terms on which the marketing may happen (subject to certain requirements). One of those requirements is that cooperation agreements are in place between the relevant regulatory authorities in the third country and the Member State where the AIF is marketed.

Secondly, the Committee asked for clarification on whether the UK meets the requirements set out in article 3(d)(iv) of the EuVECA Regulations.

As mentioned in your report, to access the EuVECA label, the fund must invest at least 70% of its capita l into qualifying investments - e.g. startups for EuVECA. These qualifying investments can be established in a third country, provided that the third country:

1. is not listed as a non-cooperative country by the Financial Action Task Force (FATF) on Anti-Money Laundering and Terrorist Financing;and

11 . has signed agreements with the home Member State of the EuVECA manager or the Member States in which the EuVECA fund will be marketed to signal compliance with the OECD Model Tax Convention standards (Article 26) on the exchange of information.

The UK meets both of these criteria and therefore, in a post-Brexit scenario where the UK was treated as a third country, EU-based EuVECA funds could still invest in UK startups as they could still be classed as qualifying investments.

On point i, the UK is not listed as a non-cooperative country by FATF. On point ii, the UK already has multilateral agreements in place with all EU Member States covering the exchange of information. The UK and all EU Member States are signatories to the Convention on Mutual Administrative Assistance in Tax Matters1. This was developed jointly by the OECD and the Council of Europe in 1988 and amended by Protocol in 2010. This means that the UK already meets the OECD stnadards for exchange of information for tax purposes and will continue to after withdrawal from the European Union.

Thirdly, the Committee has asked whether it is the government's intention to seek continued association with the European Investment Fund (EIF) after Brexit, and, if so, how it would retain appropriate oversight over its activities.

The government recognises that the European Investment bank, and its EIF arm, have been an important source of funding for UK's growth businesses. The UK's negotiating position was set out by the Chancellor in his mansion House speech earlier this year, where he set out that it may prove to be in the mutual interest of the UK and the EU for the UK to maintain an ongoing relationship with the EIF after the UK has left the EU. The government is looking to explore these options with the EU as part of the Article 50 negotiations. The nature of the UK's future relationship, including oversight, is a matter for these negotiations.

30 December 2017

Letter from Mel Stride to the Chair

Cash Control Regulation (38431) 15642/16

Thank you for your letter of 19 December about the proposed changes to the EU Regulation on controls of cash entering or leaving the European Union.

I noted in my letter of 6 December that I have reminded my officials of the importance of prompt action to keep Committees and Parliament fully sighted. It is rare that Customs matters trigger a JHA Opt-In. Regrettably this resulted in some delay in preparing the required Written Ministerial Statement. HMRC has now reviewed and improved internal processes to avoid this occurring in the future.

You mentioned the impact of this regulation on the Northern Irish border after our exit from the EU. HMRC will implement a system of cash controls that aligns with Government policy of no physical infrastructure at the border with Ireland. The system will reflect the outcome of negotiations. My

officials will continue to liaise with DExEU officials regarding the EU exit implications of the proposed cash control regulations.

You may also wish to be aware that the European Parliament agreed its position on the proposed regulation last month, allowing discussions to move to trilogue stage. These discussions are due to start later this month and indications are that this might be a swift process with agreement likely around June 2018. If, as anticipated, this is followed by an implementation period, we could see the proposed regulation coming into force by 2020. I will continue to keep the Committee informed of developments during the trilogue process.

10 January 2018

Letter from the Chair to Mel Stride

Cash Control Regulation: implications for the Irish border after Brexit (38431) 15642/16

Thank you for your letter of 10 January on the EU’s proposed new Cash Controls Regulation (CCR).

As you will be aware, the Regulation — in both its current iteration and the draft revised version — requires the customs authorities of all EU Member States to monitor physical movements of cash exceeding €10,000 in and out of the EU. This is done primarily by requiring people entering or leaving any Member State to declare whether they are carrying a sum in excess of that threshold to the authorities, either in advance or at the point of entry or exit. In addition, customs authorities can inspect luggage and seize cash they suspect is being transported for illicit purposes.

In November last year, we raised some concerns with you about the implications of the EU’s cash control regime for the Irish border after Brexit and any subsequent transitional period.1 The Irish Government, unless there is an agreement to the contrary, will be under an obligation under the EU law to apply cash controls to people crossing to and from Northern Ireland after the UK becomes a non-EU country for the purposes of the CCR. Similarly, the Government has confirmed its intention to maintain a post-Brexit control regime on movements of cash into the UK from both EU and non-EU countries which is based on the new EU Regulation.2

In response to our request for clarification of the Government’s approach to the issue of cash controls at the Irish border as part of its wider commitment to avoid any physical infrastructure there, you state that “HMRC will implement a system of cash controls that aligns with Government policy of no physical infrastructure at the border with Ireland”, and that this system “will reflect the outcome of negotiations”.

We have taken this as confirmation that a cash control regime will need to be applied at the Northern Irish border following Brexit, but without the presence of customs officials to make physical checks. However, any differentiated approach between the strictness of such controls in Northern Ireland compared to English, Welsh or Scottish points of entry or exit could leave a loophole for organised crime groups to exploit.

We would therefore welcome further information from you about how HM Revenue and Customs intends to monitor movements of cash in and out of Northern Ireland without any border formalities and the ability to perform on-the-spot inspections of the luggage or vehicles of those entering or leaving the UK. Its proposed approach could then also be used by the Irish authorities on the other side of the border, to minimise the disruption.

The Committee will assess the precise implications of the new Cash Controls Regulation in more detail when we receive further information from you about the negotiations between the Council and the European Parliament.

24 January 2018

Department for Work and Pensions

Letter from Penny Mordaunt to the Chair

Modernisation of EU Health & Safety Law (38464) 5431/17

Communications from the commission to the European parliament, the Council, the European Economic and Social Committee and The Committee of the Regions Safer and Healthier Work for All – Modernisation of the EU Occupational Safety and Health legislation and policy (38464) 5431/17

Thank you for the Committee's report of 22 February 2017 which cleared from scrutiny the communication from the European Commission on the modernisation of European Union occupational safety and health legislation (EU OSH) and policy. I previously sent the Committee an Explanatory memorandum (EM) on this.

21 August 2017

Letter from the Chair to Sarah Newton

Modernisation of EU Health & Safety Law (38464) 5431/17

I write to thank you for your predecessor's letter of 21 August on the Government’s submission to the European Commission on potential simplification of EU occupational health & safety legislation, and the status of such legislation under the Withdrawal Bill following our exit from the EU. The Committee has taken note of the fact that the Government has “no plans to make any substantive changes to health and safety regulations at the point of exit”.1

Irrespective of the merits of the Government’s proposals (which were not, as you state, taken forward by the Commission), it is clear that their implementation after Brexit would constitute such a “substantive change” of policy. Therefore, for the avoidance of doubt, it would be helpful if you could confirm that you agree that:

The Government’s view on those elements of the EU’s health and safety acquis which could be improved, as identified in your letter of 21 August, do not constitute “deficiencies” in EU law for the purposes of clause 7(1) of the Withdrawal Bill; and

The “simplification ideas” set out in your letter could therefore not be implemented as part of the Brexit process using the Government’s powers to make regulations under that clause.

I look forward to receiving your response within the usual 10 working days.

29 November 2017

Letter to the Chair from the Minister for Disabled People, Health and Work (Penny Mordaunt)

Proposal for a regulation of the European Parliament and of the Council establishing the European Agency for Safety and Health at Work  (38025) 11531/16

I thought it would be helpful to update the Committee on the latest developments with the above proposal. The Committee in the previous parliament granted a scrutiny waiver that enabled the United Kingdom to give approval to the General Approach that was adopted on the proposal at the 8 December 2016 meeting of the European Union’s Employment and Social Policy Council. 

Since then there has been little to report on the file as the European Parliament’s Committee on Employment and Social Affairs has only recently adopted the amendments it proposes to the regulation. We understand that these will form the basis of the EP’s mandate for the trilogue discussions, subject to confirmation by the plenary.  

Most of the amendments proposed by the committee are either procedural or administrative in nature and in the main uncontentious. However, there are a few amendments that the government believes are potentially problematic or outside the capability of the Agency. As an example, one amendment includes workplace inclusion in the remit of the Agency. This matter has considerations that go well beyond the Agency’s strict expertise in the field of occupational safety and health (OSH).  

Another amendment expands the role of the Agency to provide policy-makers with research-based OSH policy proposals. The Agency was set up to conduct research into OSH and to provide related scientific, technical and economic information to the EU’s institutions, its member states and the social partners. This is where the Agency adds value, particularly by spreading good practices, and the government believes that expanding the Agency’s mission into the policy-making field could divert resources from this important information gathering and dissemination role.

We understand from the Estonian Presidency of the Council that the text for the trilogue discussions will be distributed after the summer break. I will write again when there are further developments to report. 

31 August 2017

Letter from Penny Mordaunt to the Chair

Re: Explanatory Memorandum: Modernising EU health and safety policy (38464) 5431/17

Thank you for the Committee's report of 22 February 2017 which cleared from scrutiny the communication from the European Commission on the modernisation of European Union occupational safety and health legislation (EU OSH) and policy. I previously sent the Committee and Explanatory Memorandum (EM) on this.

The report requested further information on two things:

1) Details of the specific ideas for the simplification of EU OSH law made by the Government of the European Commission.

2) Whether the great repeal Bill will make any substantive changes to EU OSH law as it is converted into domestic law.

Simplification ideas

Simplification ideas were included in a December 2013 report to the European Commission from the Government. This reported on the practical implementation of the OSH directives in the United Kingdom in the period 2007-12. The simplification ideas were focused on making area of regulation more risk-based and proportionate without reducing standards and were made as a contribution to the Commission's evaluation of the directives. The main ideas were published in a DWP report entitled "Appraisal of HSE's approach to negotiating and implementing European legislation" and are summarised below:

To give member states more flexibility to determine when risk assessments must be recorded (OSH Framework Directive - 89/391/EEC)

To repeal the provision for employers to meet the cost of eye and eyesight tests for their employees in relation to the use of display screen equipment (Display Screen Equipment Directive - 90/270/EEC).

To amend the definition of 'client' to remove private householders from health and safety construction duties and give more flexibility to member states to determine what duties should apply to lower-risk construction projects (Temporary or Mobile Construction Sites Directive - 92/57/EEC).

To repeal the Artificial Optical radiation Directive as its requirements are disproportionate to the actual risk of harm to workers from artificial optical radiation (Directive 2006/25/EC).

To remove the duplicated common requirements (e.g. risk assessment, worker consultation and training and instruction of workers etc.) from other directives so that they only rest in the Framework Directive.

Not included in the DWP report but also identified was the repeal of the Electromagnetic Fields directive as its requirements are disproportionate to the actual risk of harm to workers from electromagnetic fields (Directive 2013/35/U).

As set out in the EM, the Commission's eventual proposals were relatively modest in terms of simplification. These focused on technical updates to some directives, picking up some ideas we had identified. The Commission also picked up our proposals for focusing more on sharing what works between member states to address the disparity of health and safety performance under the existing body of EU law.

Withdrawal Bill (formerly known as the Repeal Bill):

The purpose of the withdrawal bill is to convert EU law into domestic law at the moment we leave the EU. This means that, wherever practical and appropriate, the same rules and laws apply on the day of exit as applied the day before. This coupled with the government's firm commitment to protect workers' rights means that there are no plans to make any substantive changes to health and safety regulations at the point of exit. This approach will give certainty to employers and employees alike, creating stability in which the UK can grow and thrive. It will then be a matter for parliament to decide which elements of that law to keep or amend or repeal once we have left the EU.

I hope this information is of help to the Committee.

21 August 2017

Letter from the Chair to Sarah Newton, European Agency for Health and Safety at Work

Proposal for a Regulation establishing the European Agency for Safety and Health at (38025), 11531/16

Thank you for your predecessor's letter of 31 August on the state of play of discussions on the document. We look forward to a further letter when there are developments to report. The document remains under scrutiny.

13 November 2017

Letter from Sarah Newton to the Chair

Modernisation of EU health & safety law (38464) 5431/17

Thank you for your letter of 29 November 2017, in which you asked for confirmation of two points for the avoidance of doubt. I agree with the position of the Committee that;

Those elements of the EU’s health and safety acquis which could be improved, as identified by my predecessor in their previous letter of 21 August do not constitute “deficiencies” in EU law for the purposes of clause 7(1) of the Withdrawal Bill; and

The “simplification ideas” in the same letter by my predecessor could, therefore, not be implemented as part of the Brexit process using the Government’s powers to make regulations under that clause.

I hope this information is of help to the Committee.

13 December 2017

Letter from the Chair to Alok Sharma

Revision of Regulation 883/2004 and the European Health Insurance Card (38400) 15642/16

I am writing on behalf of the European Scrutiny Committee regarding recent press reports about the fraudulent use of European Health Insurance Card (EHIC) issued by the NHS.

From the reports, it appears that reimbursement by the NHS of fraudulently-claimed emergency healthcare costs incurred elsewhere in the EU are caused primarily by insufficiently strict identity checks on EHIC applications by the NHS Business Services Authority.

Nevertheless, I would be grateful if you could clarify whether the Government believes that the EU legal framework that underpins the EHIC system (Regulation 883/2004 and 987/2009) needs to be amended to address this type of fraud. As you know, these Regulations are currently subject to an

amending proposal at EU-level,1 meaning that there is unlikely to be a more opportune moment to press for amendments to the provisions regarding the EHIC.

Should changes to the Regulations be considered necessary, this is especially pressing as the Government is seeking to remain part of the EHIC system after Brexit,2 at which point it will no longer have its current degree of influence over changes to the legal framework.

It would also be useful if you could explain whether options already available under EU law, for example to limit the validity of the card to less than five years, are being considered to tackle fraudulent use of EHICs.

24 January 2018